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

Floor Speech

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Mr. FOSTER. Mr. Chairman, I thank the ranking member for yielding me time.

I rise today in opposition to S.J. Res. 57, which provides for congressional disapproval of CFPB guidance on discrimination in the indirect auto lending industry.

As the only Ph.D. scientist in Congress, when I come to the floor, it is usually to debate science or important technical details of financial service regulations. But I am also the son of a civil rights lawyer, a scientist who stepped away from his career in science and became a civil rights lawyer. My father actually wrote much of the enforcement language behind the Civil Rights Act of 1964.

The issue of minorities being systematically overcharged when purchasing automobiles is not a small issue, and, unfortunately, it is not going away.

This issue was first documented academically in the Chicago metropolitan region in the early 1990s when it was found that if you were a non-White person you were, on average, charged over $500 more, in today's dollars, than a White person was.

In a recent study in the D.C. suburbs, it was found that non-Whites were charged an average of $2,500 more than White people.

I understand this is a subject for some debate. I urge my colleagues to actually read the report that some are calling junk science here. It is a report that, frankly, as a scientist, may not have the statistics that I would like in terms of a large number of test cases, but the effect is so large that it cannot be a statistical fluctuation.

It was undertaken by the National Fair Housing Alliance, and it was done with a number of important scientific controls in its process.

This number by which non-Whites are being overcharged is not a small number. If you are overcharged by thousands of dollars on every one of the 5 to 10 cars that you buy during your lifetime, it is a big impediment to building up household wealth for minorities or any family. Every dollar that goes out to pay an overpriced loan is $1 that cannot be spent for retirement savings or for your child's college education.

A big part of this discrepancy is that non-Whites were far too often discriminated against not only in whether the loan application is approved but also in the rate charged for the loan.

Because of the financial arrangement between banks, when a non-White person is overcharged for a loan, the extra profits from that are split between the dealership and the bank. So I believe there is a responsibility for both parties to make sure that this financial incentive does not lead to the sort of discriminatory behavior that we unfortunately continue to see in this country.

During the debate over the Dodd-Frank bill, we decided to exempt car dealerships from direct oversight from the CFPB. I believe we did that because we felt, correctly, that car dealerships were the victims, rather than the cause, of the financial collapse. But we retained CFPB oversight over financial products, like the loans that are sold on financial markets.

This left an important line to be drawn because both banks and dealerships need guidance. While the banks, I believe, have a duty to make sure that the dealerships that are acting as, effectively, loan brokers on their behalf are not engaging in discriminatory behavior, they cannot be expected to put one of their agents in the room where every car deal is negotiated.

So guidance is needed. Into the breach strode the CFPB, which I believe was appropriate. This guidance is important to protecting American consumers.

In the past, critics of the CFPB guidance have argued that it relies on data that is inaccurate or misunderstood. I think that it relies on an incorrect understanding of the statistical uncertainties that are always present in any scientific measurement. The effect here is real, and it is large.

In the past, there have been bipartisan efforts to put some clarity on how the CFPB could offer this guidance, and this bill walks away from that bipartisan effort.

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Mr. FOSTER. The bill that the majority is bringing to the floor this week will preclude the reissuance of that necessary guidance instructive of how to comply with the Equal Credit Opportunity Act of 1974, which will remain in place.

Lenders will still be, rightly, required to comply with the law, but they will not have any guidance on how to do so, leading at least one analyst to call S.J. Res. 57 a ``long-term negative for lenders,'' which, as a businessman, I agree with. S.J. Res. 57 is bad for both consumers and for lenders.

Mr. Speaker, I urge my colleagues to oppose S.J. Res. 57 and preserve the opportunity to promulgate guidance intended to curtail discrimination.

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