Congress Undercuts CFPB’s Disparate Impact Use for Indirect Auto

January 18, 2017

On Wednesday, January 18, 2017, the House Financial Services Committee (HFSC) released its third installment in its series challenging the CFPB’s use of disparate impact in indirect auto lending.  Throughout the report, the HFSC set forth arguments why it thinks the CFPB would not be able to prove a disparate impact claim in court, especially given last year’s Inclusive Communities Supreme Court decision, and provided insight into the CFPB Legal Department’s concerns with the larger non-bank participant rule for auto finance companies.

 

In conjunction with its report, the HFSC released internal CFPB memos deliberating the larger non-bank participant rule and disparate impact approaches. Notably, a memo from CFPB’s Legal Department’s dated February 11, 2015, argued the Bureau should amend its rulemaking process for the larger non-bank participant rule.  Specifically, the memo stated: “Legal believes that, if the Bureau’s failure to publish the Experian non-proprietary data for public comment were challenged, there is a cognizable risk that a court would find the rule procedurally defective.  Accordingly, Legal recommends publication of the Experian non-proprietary data and reopening of the comment period for the Auto [Larger Participant] proposed rule for at least 15 days limited to comment on the released data.”