The Senate approved of a proposal on Wednesday that could make it easier for auto-lenders to engage in racial discrimination.
The chamber passed a joint resolution repealing a Consumer Financial Protection Bureau guidance on fair lending, in a 51-47 vote. The measure was supported by every Republican present and Sen. Joe Manchin (D-W. Va.).
If passed by the House and signed into law by President Trump, the measure will scrap a directive released by the CFPB in 2013–one advising indirect auto-lenders how to comply with laws against racial discrimination in lending.
Because of the timing and the nature of the agency action, critics believe the proposal would vastly expand the scope and power of the Congressional Review Act. As noted by Sen. Cory Booker (D-N.J.), the CRA wasn’t crafted to apply to a “years-old guidance.”
Booker also invoked his own life experience, when speaking out against the resolution on Wednesday morning. One of three sitting Black senators, he recalled how his own parents were almost denied a house in New Jersey, just after the 1968 passage of the Fair Housing Act.
“There shouldn’t be different rules, and different laws, and different treatment based on the color of your skin,” Booker said. “I can’t believe we’re talking about this in 2018.”
Since the guidance was issued, the CFPB has reached settlements with a handful of indirect lenders. In late 2013, Ally Financial signed a deal with the Bureau agreeing to repay some $80 million to people of color who had been charged higher interest by about 0.25 percent, on average.
The Bureau has also entered into settlements with Fifth Third Bank, and the credit arms of Honda and Toyota, as Sen. Elizabeth Warren (D-Mass.) noted on Tuesday.
“Let’s be clear: discrimination in auto lending is alive and well,” Warren said. She noted a recent study, which found that White borrowers in Virginia were offered better terms on auto credit–by about $2,500 over the life of the loan.
Auto lenders have also attracted attention in recent years for marketing subprime loans not unlike the products that caused last decade’s mortgage meltdown. In November, the New York Fed warned that delinquency rates among non-bank auto lenders are “considerably higher and rising.”
“Subprime loans are disproportionately originated by auto finance companies, and their share has nearly doubled since 2011 and now stands at over $200 billion,” the bank said in a blog post.
On Tuesday afternoon, Sen. Sherrod Brown (D-Ohio) alluded to how predatory financial companies disproportionately target people of color.
“The ZIP code I live in, in Cleveland, Ohio, had more foreclosures than any ZIP code of the United States of America,” he said, referring to last decade’s mortgage crisis.
“Part of the reason is who lives in my ZIP code mostly,” Brown added. The majority of Cleveland residents are Black.
