President Donald Trump signed legislation Monday that undoes Obama-era rules intended to protect minorities from discrimination when purchasing vehicles after Congress used an obscure rule last month to roll back the auto-lending guidance.
Congress voted last month to overturn guidance from the Consumer Financial Protection Bureau (CFPB) that targeted “dealer markups” – interest rate hikes that auto dealers place on third-party auto loans to make a profit. Mr Trump signed the bill into law on Monday in a private session.
Studies have shown minorities are regularly charged more for dealer markups than white buyers with similar credit. The CFPB warned dealers in 2013 against using these markups, saying they could lead to a lawsuit from the agency. Since then, the bureau has penalised major companies like Honda, Toyota, and Ally Financial for lending discrimination.
Those opposed to the rule claimed it thwarted business growth and was an instance of the CFPB overstepping its bounds.
However, the CFPB’s interim director, Mick Mulvaney, praised the move, saying he was “heartened that the people, through their elected representatives, have corrected this instance of Bureau overreach”.
Proponents of the rule pointed to what they say is well-documented racial discrimination in auto lending and were dismayed to see the protections dismantled.
“Years of data make clear that racial discrimination harms the economic viability of families of colour, especially those who are low-income, where a car is often one of the biggest purchases made by a household,” Rebecca Borné, Senior Policy Counsel at the Centre for Responsible Lending, said in a statement before the Senate vote last month.
“The CFPB has found discriminatory pricing in the auto financing market and should have the ability to use the full range of its regulatory tools and authority to address it,” she added.