Providing for Congressional Disapproval of A Rule Submitted By Bureau of Consumer Financial Protection

Floor Speech

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Mr. MORAN. Mr. President, I am here to lend my support to a measure that I have had the honor of working on with the Senator from Pennsylvania, Mr. Toomey, and I have worked side by side with the chairman of the Banking Committee--of which I am a member--the Senator from Idaho, Mr. Crapo. I very much appreciate the leadership that both of those individuals and my other colleagues have provided over a long period of time on this issue.

Dodd-Frank was passed as a result of the concerns that many had across the country and here in the Congress regarding the financial challenges that our Nation faced resulting from mortgages that were sold. It really was a Wall Street crisis that, in so many ways, became challenging for Main Street, with Main Street having the consequence of having the difficulties presented to them based upon what happened on Wall Street, and in so many instances, consumers ended up paying the price. But as we tried to correct the problem when Dodd-Frank was passed, it got way beyond the culprits--those who were culpable for creating the financial crisis in our Nation--and began to penalize those who had nothing to do with them.

One of the creatures of the passage of Dodd-Frank was the Consumer Financial Protection Bureau, and one of the aspects of the Consumer Financial Protection Bureau was their effort to regulate indirect auto lending.

I think the chairman, the Senator from Idaho, did a great job of explaining this resolution. Today, we have the authority to reject the decision that was made by the Consumer Financial Protect Bureau, and I hope my colleagues will join me in doing so. I have introduced this resolution to accomplish that.

Senator Toomey has made clear by his efforts that this guidance that was issued by the Consumer Financial Protection Bureau is subject to a CRA, and that is our mission today--to accomplish the passage of that CRA.

While the chairman was speaking, I jotted down perhaps four or five points that I would like to make to my colleagues. One is that those who lend money to someone buying an automobile had nothing to do with the financial collapse that occurred as a result of the mortgage crisis in 2007 and 2008.

I think Republicans probably made a mistake--I could take out the political word ``probably.'' Republicans made a mistake in saying ``We are going to repeal Dodd-Frank,'' and Democrats responded by saying ``You are never going to touch Dodd-Frank.'' As a result, since 2008, we have been unable to correct, in a bipartisan way, the problems that many of us saw with Dodd-Frank. There are those who say ``We are going to get rid of the entire thing,'' and those who say ``You can't touch it.'' Therefore, the consumers--the citizens of this country-- have struggled and been damaged by the consequences of Dodd-Frank.

Today we are dealing with a specific provision, and that is the indirect automobile lending--a circumstance in which financing is arranged by someone who sells an automobile in their business to make the deal work for the consumer who wants to buy the automobile.

I would outline these five points: First of all, this ought to be a relatively easy decision because automobile dealers are specifically excluded from the provisions of Dodd-Frank. So, in my view, the Consumer Financial Protection Bureau had to work its magic to try to find a way to regulate the financing of automobiles that were arranged for by the automobile dealer in contravention to the law which says that automobile dealers are not covered by it.

I was not in the Senate at the time this amendment was offered. It was offered here in the U.S. Senate by my predecessor, Senator Brownback, and adopted as a provision in Dodd-Frank. It is very specific.

I just read the language of the exemption, the exclusion, before I came on the Senate floor. Again, it says that automobile dealers are excluded from the provisions of Dodd-Frank. Yet the Consumer Financial Protection Bureau found a way to get around direct law and, in that sense, the intent of the U.S. Senate and the House of Representatives when they passed Dodd-Frank. So just on its face, we ought to decide that the CRA is worth supporting because we are really reaffirming the decision that was made when Dodd-Frank was passed.

Second, the process the Consumer Financial Protection Bureau used-- they didn't draft a rule and go through the rulemaking process, and they didn't put anything out for comment by the industry that would be affected or by the consumers who may pay more as a result of the passage or the enactment of this guidance. But they created something that regulatory bodies often do and tried to provide--the word is ``guidance.'' What they say they are doing is providing direction, without passing a rule, to those who might be affected by the rule, but as a result of just using guidance, no input was solicited, no input therefore could be given, and the Administrative Procedure Act was avoided.

I remember the Director of the Consumer Financial Protection Bureau was in front of the Banking Committee when he was asked: How can this be? His answer was simply: This is guidance, and the Administrative Procedure Act doesn't apply. Yet, as we have seen, the GAO has recently concluded that this is the same outcome, the same result as rulemaking would be and therefore subject to the CRA.

What that highlights for me is, in two instances already, the CFPB finagled and created a way to get to an outcome they wanted without following, in this case, the Administrative Procedure Act and, secondly, in violation of the statutory prohibition against having anything to do with automobile dealers. So for those two reasons, we ought to be opposed to the guidance that was directed to the automobile dealers and those who lend money at the direction of those automobile dealers.

The third item I would raise is what this guidance is designed to do is to prevent discrimination. What they claimed they were doing was to make certain that interest rates do not differ based upon a person's race. If that were the desired outcome, I would have no qualms. But because you can't ask a person's race, there is no way to know. So what the Consumer Financial Protection Bureau did was to create a computer program, an algorithm, in which they guessed what a person's race was based upon their last name--how it sounds--and, secondly, on their ZIP Code. Never was the Consumer Financial Protection Bureau able to provide the evidence that anyone had been discriminated against, only that if you use a computer program and run a bunch of numbers through it, the algorithm, based upon what a person's name sounds like--which I guess, in my mind, is discrimination in and of itself--and, secondly, the ZIP Code--perhaps the same thing could be said about that-- determine what race a person is or was.

So the methods by which the Consumer Financial Protection Bureau determined discrimination were flawed. In fact, a bipartisan report indicated that 41 percent of the determinations were inaccurate, so not quite half of every time the algorithm guessed what the race of a borrower was, it was wrong. Yet that apparently was sufficient for the CFPB to believe they had a basis to determine whether someone was discriminated against.

I can't imagine that many Americans would find it comforting to know that only a computer program determines what somebody believes their race is, again, based upon a hypothetical and not upon actual facts.

Again, the method by which the guidance was used to determine discrimination was significantly flawed and a process in which I can't believe many Americans would find comfort.

What I would say, finally, is that elimination of the guidance-- passage of the CRA today--would not do anything to change the prohibition against discrimination. It is not that if the CRA is adopted that discrimination now becomes legal; in fact, we all can agree that discrimination has no place in our society or in our economy. But the absence of this CFPB guidance does not make discrimination legal. It does not amend or modify the Equal Credit Opportunity Act nor does it change regulation B, which allows for enforcement of that act.

What we are trying to do is correct the mistakes by the Consumer Financial Protection Bureau under Dodd-Frank, which says that you can't deal with automobile dealers, correct the problems that the Consumer Financial Protection Bureau created by using an algorithm to determine discrimination, and at the same time, not do anything to change the prohibition, the illegality of discriminating against a person based upon that person's race.

Also, I think we can easily make the case that this kind of guidance, this effort by the Consumer Financial Protection Bureau, causes damage to the consumer, who therefore will not get the benefit of an appropriate rate of interest because of the fear of this guidance, which then, ultimately, results in just a standard interest rate for everyone.

Today we have the opportunity to correct a problem that was created in contravention of a law that used a flawed method to determine whether a person was discriminated against and to improve the circumstances that consumers face at a time in which every dime matters, so we should see improvement in the opportunities for people to borrow money and to buy an automobile for the benefit of themselves and their families.

I hope that my colleagues will join me, as they did on the motion to proceed, and that this CRA will be adopted over the next day or so.

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