Senate votes to revoke anti-discriminatory protections

CHARLENE CROWELL | 4/29/2018, 11:38 p.m.
America is often touted as a nation of laws, and not of men. But it seems that today some lawmakers ...
Charlene Crowell

Center for Responsible Lending

America is often touted as a nation of laws, and not of men. But it seems that today some lawmakers have no interest in upholding laws that mandate fairness in financial services – particularly when consumers of color are affected.

On April 18, the U. S. Senate voted 51-47 in support of S.J. Res 57, a joint resolution to revoke the Consumer Financial Protection Bureau’s 2013 guidance on indirect auto lending. The previous day, the Trump Administration issued a statement in support of the rollback.

Among those voting against the resolution was Connecticut Senator Richard Blumenthal who issued a statement following the unfortunate vote.

“Perpetuating predatory practices that lock consumers of color into higher auto loan interest rates doesn’t just harm those individuals, it exacerbates ethnic and racial wealth disparities that feed into the deep inequality that exists in our country today,” Blumenthal said.

But Senate Majority Leader Mitch McConnell of Kentucky welcomed revisiting auto lending regulation. “Our whole economy is getting a tune-up. And now it’s time for the front end of the auto industry to come along for the ride,” said McConnell in a related article.

What the senior senator from Kentucky does not seem to know is that consumers of color, especially Blacks and Latinos, already know too well how it feels to be taken on the wrong ride in auto finance.

Scrutiny is also warranted for the 51 Senate colleagues who agreed with Majority Leader McConnell. In fact, among Senators serving as co-sponsors of the ill-advised resolution were representatives of Alabama, Arkansas, Florida, Georgia, Louisiana, Indiana, Mississippi, Missouri, North Carolina, Ohio, Nevada, Pennsylvania, South Carolina, Tennessee, Texas and Wisconsin. In all, 22 senators lent their names and influence as co-sponsors.

The Senate vote came five years after CFPB’s blueprint for lenders and auto dealers underscored standards set by the Equal Credit Opportunity Act. This act makes it illegal to discriminate due to race, or other protected classes in credit transactions. Under ECOA, indirect auto lenders – those who finance loans through dealers – are creditors and must uphold the law.

Following a long history of documented discriminatory effects in auto finance, CFPB acted in 2013 to provide clear guidelines to lenders on how to avoid discrimination going forward. Following the guidance, CFPB, jointly with the Department of Justice, reached a series of settlements totaling more than $140 million with Ally Financial, Fifth Third Bank, and the financing arms of auto manufacturers Honda and Toyota – all because their pricing models showed discriminatory effects on borrowers of color.

The odds of predatory auto finance increase when consumers of color are involved. For years, consumers suspected and then began to complain of unfair practices in auto finance. By the mid-1990s, a series of related lawsuits were filed, all alleging that consumers of color received higher interest rates than those given to similarly situated white borrowers. Oftentimes, the higher rates charged to borrowers of color were not related to their creditworthiness. This contention was documented earlier this year by the National Fair Housing Alliance. This housing advocate’s investigation found that better qualified non-White testers participating in an investigation of auto lending would have paid an average of $2,662.56 more than less-qualified White counterparts.