The House voted Tuesday to strike down an Obama-era auto-lending safeguard using a novel maneuver that consumer watchdogs warn could expose decades of federal regulation to the same fate.
In a 234-175 vote, the House agreed to eliminate 2013 Consumer Financial Protection Bureau guidelines that the agency drafted to combat racial discrimination by auto dealers that facilitate car loans for their customers. President Donald Trump is expected to sign off on the rollback, which the Senate first passed last month.
The repercussions of the move may be felt well beyond the CFPB, which is already being reined in under the leadership of acting Director Mick Mulvaney, who also serves as the White House budget director.
It marks the first time that lawmakers have used the Congressional Review Act to block a years-old agency action beyond a narrow window defined under the 1996 law. It’s also noteworthy because the CFPB action at issue was published as regulatory guidance, rather than Congress’ typical target under the law – formal agency rules that went through public notice and comment under the Administrative Procedure Act.
Supporters of the rollback accused the CFPB of overreach in crafting the guidance.
"If Congress means what it says when it writes laws, then the bureau should not be allowed to willfully ignore that law and deny market participants due process in the offing," House Financial Services Chairman Jeb Hensarling (R-Texas) said.
Though the Congressional Review Act is aimed at undoing recently issued rules, Sen. Pat Toomey (R-Pa.) last year was able to reset the clock for the 2013 guidance by asking the Government Accountability Office to determine that it qualified as a "rule" under the law.
That allowed Senate Republicans last month – with the help of a lone Democrat, Sen. Joe Manchin (D-W.Va.) – to take advantage of a brief window for fast-track authority under the Congressional Review Act to block the rule without having to fend off a filibuster by Democrats.
While agencies often release informal guidance to inform stakeholders of how to comply with the law, Republicans said the CFPB in this case was using it as a vehicle to regulate auto dealers, which Congress prohibited the bureau from touching.
The guidelines were aimed at lenders that fall under the CFPB’s oversight, outlining steps they should take to address racial discrimination by dealers involved in providing financing to their customers.
Auto dealers and lenders backed the effort to roll back the guidance.
Democrats and consumer advocates warned that the process used to gut the CFPB guidance could be used in the future to attack a wide range of regulatory actions going back more than 20 years.
Rep. Maxine Waters (D-Calif.), the top Democrat on the House Financial Services Committee, said Tuesday it was "an inappropriate and misguided use of the Congressional Review Act that sets a dangerous precedent."
"This vote won’t just leave minorities vulnerable to unscrupulous car dealers," said James Goodwin, senior policy analyst at the Center for Progressive Reform. "It will also do further damage to Congress’s legitimacy by creating the appearance, if not the reality, that its new function is to roll back regulatory safeguards on demand from whatever well-connected industry bids the highest or squawks the loudest."
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