Reforming CFPB Indirect Auto Financing Guidance Act

Floor Speech

BREAK IN TRANSCRIPT

Ms. MAXINE WATERS of California. Mr. Chairman, I yield myself 5 minutes.

Mr. Chairman and Members, I rise today in opposition to H.R. 1737, which would impede the Consumer Financial Protection Bureau's important work of regulating discriminatory auto lending practices and protecting minority borrowers.

In spite of the fact that Chairman Hensarling just talked about a study, what he didn't tell you is that was a study that was done by the automobile industry, who is supporting this bill.

H.R. 1737 would cancel important policy guidance the CFPB provided to lenders to help them comply with Federal fair lending laws.

The bill also imposes burdensome restrictions on the issuance of any future auto lending guidance by requiring that the CFPB undergo a public notice and comment period and conduct cost-benefit studies before issuing guidance, requirements that have historically only been applied to agency rulemakings.

These restrictions are clearly designed to substantially delay or effectively prevent the Bureau from issuing future antidiscrimination guidance to auto lenders, action that would undermine a lender's ability to comply with the law at the expense of minority borrowers. The long shadow of discrimination is still alive and well in some corners of the auto lending marketplace.

The CFPB has secured nearly $140 million in relief to minority borrowers since December 2013 in landmark settlements against Ally Financial, Fifth Third Bank, and American Honda Finance Corporation, finding in each case that undisclosed dealer markups caused minority borrowers to overpay for their auto loans by an average of $200 over the life of the loan compared to similarly situated White borrowers, even when considering the borrower's creditworthiness.

Mike Jackson, the CEO of the Nation's largest auto retailer, AutoNation, commended the CFPB's approach in its settlement with Honda, noting that other lenders should take a close look at the Honda settlement as a template for a solution.

Much like Mr. Jackson, I believe that the CFPB is doing a commendable job of tackling a decades-old problem of minority borrowers not getting a fair deal when they obtain financing from dealerships.

The Bureau's work in this regard should be supported, but instead, we are faced with H.R. 1737, yet another legislative proposal that would attempt to tie the Bureau's hands as it attempts to inform lenders of the steps that they can take to comply with Federal fair lending laws and to protect minority borrowers.

I wouldn't care if everybody were treated the same way--you charge everybody too much--but, when you single out a certain segment of our society that happens to be minorities and you charge them more than other borrowers, it is a problem.

H.R. 1737 follows a familiar script of industry-driven attempts to undermine the CFPB. Cost-benefit analysis, public notice and comment periods, outside rulemakings, unnecessary interagency consultation requirements are all designed to do the same thing, delay and undermine the important work of the CFPB.

Instead of addressing the underlying discrimination in indirect auto lending that the CFPB is seeking to address, H.R. 1737 takes away an important tool for lenders seeking to follow the law who have been relying on the guidance for almost 3 years to develop their compliance policies.

This is not a modest proposal designed to bring about transparency in the CFPB's oversight of auto lenders. Since issuing its guidance in March 2013, the CFPB has been transparent.

It has provided industry with its models for identifying potential fair lending violations. Its supervisory manual describes exactly what the Bureau is seeking when conducting fair lending exams and supervisory highlights that clearly set forth the kinds of business practices that the Bureau will focus on when it examines an indirect auto lender.

Furthermore, the CFPB's settlement agreements all follow a similar template that give lenders a glimpse into the kind of remediation that the Bureau will pursue should there be potential fair lending violations within a lender's portfolio.

H.R. 1737's supporters have yet to identify what information any additional transparency would yield or what additional information lenders need to comply with Federal fair lending laws.

If enacted, H.R. 1737 would actually place lenders at a disadvantage, just as scrutiny for fair lending violations from the CFPB and the DOJ intensifies. We should be working to support efforts to give industry as much information as possible so that they can comply with the law. H.R. 1737 does just the opposite, creating unnecessary uncertainty for lenders.

Mr. Chairman, I reserve the balance of my time.

BREAK IN TRANSCRIPT

Ms. MAXINE WATERS of California. Mr. Chairman, I yield myself such time as I may consume.

We must realize that what Mr. Garrett just shared with us is certainly not what the CFPB has done. As a matter of fact, what the CFPB has done, it has said: Lender, you cannot say that I will take X amount of percentage of interest; I will take 5, 10 percent interest; and, dealer, you can mark it up another 3, 4, 5 percent.

So he has not exactly shared with you what happens with the CFPB.

I yield 3 minutes to the gentleman from Minnesota (Mr. Ellison), a member of the Financial Services Committee.

BREAK IN TRANSCRIPT

Ms. MAXINE WATERS of California. Mr. Chairman and Members, this business about consumers not being able to negotiate down, that somehow the car dealers can't give a discount is absolutely not true, absolutely not true.

I yield 2 minutes to the gentlewoman from Wisconsin (Ms. Moore), the ranking member on the Subcommittee on Monetary Policy and Trade of the Financial Services Committee.

BREAK IN TRANSCRIPT

Ms. MAXINE WATERS of California. Mr. Chairman, what Mr. Stutzman is doing is trying to confuse people between a rule and a guidance. This is a guidance, and they are trying, through this legislation, to make guidance comply with the same kind of rules that the rules have to go through. So don't pay any attention to that. He is just trying to confuse people.

Mr. Chairman, I yield 2 minutes to the gentlewoman from New York (Ms. Velázquez), a member of the Financial Services Committee.

BREAK IN TRANSCRIPT

Ms. MAXINE WATERS of California. Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman and Members, all of the arguments that are used by the other side simply are not true.

They claim that the CFPB does not have the authority. They do have the authority under the Equal Credit Opportunity Act.

They claim that they didn't use the right methodologies, the same that is used by the Justice Department.

They claim that the dealers can't give discounts. That is absolutely not true. They can.

I yield as much time as he may consume to the gentleman from New York (Mr. Jeffries), a young man that has been leading an effort on the floor of Congress for justice for minorities and women consistently.

BREAK IN TRANSCRIPT

Ms. MAXINE WATERS of California. Mr. Chairman and Members, no one on this side of the aisle mentioned the word ``racist.'' It is only coming out of the mouths of the people on the opposite side of the aisle.

I yield 2 minutes to the gentleman from Colorado (Mr. Perlmutter), a member of the Financial Services Committee.

BREAK IN TRANSCRIPT

Ms. MAXINE WATERS of California. Mr. Chairman, I yield myself the balance of my time.

Mr. Chairman and Members, this discussion today has been about discrimination. This discussion today is about the very powerful automobile dealers who come to the Congress of the United States and use their considerable influence to get the Members of Congress to get rid of a guidance that was put together by the Consumer Financial Protection Bureau.

They don't want the guidance because they don't want to be guided in how not to discriminate. They have gotten away for years with markups, and they have gotten away for years with targeting certain communities. For those who say that this has not happened, you are absolutely wrong. Minority communities, poor communities are targeted by every scheme and every fraudulent operation that you can think of.

Whether we are talking about this markup that causes minorities to pay more for automobiles or payday loans or whether we are talking about these private, postsecondary rip-off schools, communities of color are not only targeted in these ways, but we discovered in the 2008 subprime meltdown that communities have been targeted and that minorities who have the same credit ratings as others who are given loans--minorities who pay their bills--were charged more in interest rates for their mortgages than others.

This is not something that we are making up. The people on the opposite side of the aisle will have you believe they are working in the best interest of these minorities who continue to be ripped off. I don't have to say much, if anything, to prove that that is not true. Just take a look at who is supporting them. We are supported by the NAACP, the National Council of La Raza, the National Association of Minority Auto Dealers, the Center for Responsible Lending, the National Consumer Law Center, the Center for Working Families, the Consumers Union. There are 67 consumer organizations who are sick and tired of seeing minorities being ripped off.

We are often counseled by those who say we are not pulling ourselves up by our bootstraps, that we are not doing enough. Why do you think a wealth gap exists? It exists because these fraudulent schemes are supported by people like those on the other side of the aisle.

I urge everyone in Congress to vote ``no'' on this discriminatory legislation.

Mr. Chairman, I yield back the balance of my time.

BREAK IN TRANSCRIPT

Ms. MAXINE WATERS of California. I yield myself such time as I may consume.

Mr. Chairman and Members, I am in opposition to this bill because it is simply another study, another cost to government, another unnecessary cost. While my friends on the opposite side of the aisle always claim that they are reducing the cost of government, these studies do very little.

As a matter of fact, instead of a study, some of these Members who represent rural areas ought to become real advocates for their constituencies. They charge many of us as being advocates for health care, education, housing, and transportation, all of which they lack in their communities, but you never see them fighting for it. If it were not for some of us who are out there demanding better health care, better transportation systems, better education, and fighting for those who get ripped off by these fraudulent businesses every day, they wouldn't have any protection because they send too many Members to Congress who mislead them on other kinds of issues, but when it comes to their economics, you cannot find them anywhere.

So, instead of a study, another study, another cost to government, why don't they become real advocates for their constituency? Why is it that we don't have transportation systems in rural communities? Why is it they have to travel miles for health care? It is because they have Representatives whom they send to Congress who are really not representing their real interests. They may get their colleagues to vote for yet another study because they don't do anything that is real and substantive for their communities.

I yield back the balance of my time.

BREAK IN TRANSCRIPT

Ms. MAXINE WATERS of California. Mr. Chairman, I thank the gentlewoman for yielding time.

As Mr. Hensarling said, it may be redundant, but that is okay. It reinforces basically what we have been talking about in relationship to 1737.

I will just take a moment to say how proud I am of the Consumer Financial Protection Bureau, how proud I am of Mr. Cordray, how pleased I am that this is the centerpiece of the Dodd-Frank reform, how pleased I am that we now have an agency that is looking out for consumers.

Prior to the Consumer Financial Protection Bureau, our regulatory agency said their job was for safety and soundness. They forgot about the consumers; they were dropped off the agenda.

Now we have a Consumer Financial Protection Bureau that is challenging the practices of many who claim they are in legitimate businesses. They are challenging them. They are saying to them: No longer can you rip off our consumers. No longer can you target minorities. No longer can you have discriminatory practices.

Thank God for the Consumer Financial Protection Bureau.

BREAK IN TRANSCRIPT

Source