By Jeff Sovern, St. John’s University School of Law
Alan Kaplinsky and Chris Willis, on the one hand, and Adam Levitin, on the other, have been dueling over the impact of Congress’s use of the Congressional Review Act to disapprove of the CFPB’s Indirect Auto Lending Guidance. Those of us interested in consumer financial law are lucky to have these titans lay out the arguments for their respective positions. Regular readers of this blog will not be surprised to learn I agree with Adam, but I wanted to add a couple of minor observations to what Adam said (though if you haven’t read what Adam has said, you would be better off reading that than what I have to say). In brief, Alan and Chris argue that a result of Congress’s action (assuming, as seems inevitable, that the president signs the resolution) is that the CFPB would no longer be able to use its enforcement powers against a lender that gave dealers discretion to mark up the rates on the lender’s loans if the result of the dealer discretion was to charge protected groups higher rates.
Here’s a thought experiment: suppose Mick Mulvaney issued a guidance saying that the CFPB was going to enforce consumer financial law (I did say it’s only a thought experiment) and Congress then invalidated that guidance using the CRA. Would we then say that the CFPB could not enforce consumer law? Of course not; the statutes giving the CFPB the power to do so would still be in effect and Congress cannot use the CRA to repeal statutes giving the CFPB power to enforce the laws Congress has enacted. So it is here (as Adam points out); at most, the CFPB can’t issue a new guidance or rule or one that is substantially the same as the Indirect Auto Guidance, and even that is in question for the reasons Adam notes. The CRA says nothing about enforcement of existing statutes and regulations that have not been disapproved.
One thing that illustrates the problem with the CRA as applied to the Guidance is that the Guidance says many things. I’m going to insert a quote from the Guidance and as you read it, ask yourself which of these things Congress disapproved of in its resolution:
In our most recent Supervisory Highlights, we set out the following features of a strong fair lending compliance program, which are applicable in the indirect auto lending context:
- an up-to-date fair lending policy statement;
- regular fair lending training for all employees involved with any aspect of the institution’s credit transactions, as well as all officers and Board members;
- ongoing monitoring for compliance with fair lending policies and procedures;
- ongoing monitoring for compliance with other policies and procedures that are intended to reduce fair lending risk (such as controls on dealer discretion);
- review of lending policies for potential fair lending violations, including potential disparate impact;
- depending on the size and complexity of the financial institution, regular analysis of loan data in all product areas for potential disparities on a prohibited basis in pricing, underwriting, or other aspects of the credit transaction;
- regular assessment of the marketing of loan products; and
- meaningful oversight of fair lending compliance by management and, where appropriate, the financial institution’s board of directors.
Is the answer all of them? CRA resolutions don’t permit Congress to pick and choose among parts of the regulation, so it appears that Congress disapproved of all of those items, and more. If so, if the CFPB has lost its enforcement power with respect to the Guidance, does that mean the CFPB can no longer require lenders to do anything on that list? Does that make sense? The CFPB can no longer oblige lenders to maintain an up-to-date fair lending policy? Alan and Chris try to deal with this particular paradox (those who like to think about paradoxes might also speculate about what would happen if Congress used the CRA to disapprove the GAO’s determination that the Indirect Auto Guidance is a rule subject to the CRA—but I digress) by limiting application of the resolution to what they call the “substantive centerpiece” of the Bulletin. But the CRA says nothing about centerpieces, substantive or otherwise. What it says is that the disapproved rule “shall have no force or effect.” What would give the CFPB the power to enforce some of the Bulletin but not the rest of it? And if that result strikes you as absurd, doesn’t it mean that the CRA resolution has no impact on enforcement but only on what it says it has an impact on: the ability of the Bureau to fashion rules?