In response to an inquiry by Senator Patrick Toomey (R-Pa), the U.S. Government Accountability Office (GAO) has issued an opinion letter concluding that the Consumer Financial Protection Bureau’s 2013 bulletin on “Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act” is a general statement of policy and a “rule” subject to the requirements of the Congressional Review Act (CRA). While the CFPB has acknowledged that its bulletin provides guidance and clarity, the Bureau maintains that it is nonbinding and has no legal effect on regulated entities. In contrast, the Dec. 5, 2017, GAO opinion letter, authored by GAO General Counsel Thomas H. Armstrong, asserts that the CFPB bulletin goes beyond the attributes of guidance and clarity and satisfies the CRA’s definition of a “rule” because, among other things, it is a “general statement of policy designed to assist indirect auto lenders to ensure that they are operating in compliance with ECOA and Regulation B, as applied to dealer markup and compensation policies.”
In March 2013, the Bureau issued its bulletin on Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act (CFPB Bulletin 2013-02) as guidance to both depository and nonbank institutions. The CFPB sought to assist indirect auto lenders with ECOA compliance in general and to provide guidance to auto lenders who permit dealers to increase consumer interest rates and compensate dealers with a share of the increased interest revenues. Noting the incentives that these markup and compensation policies create, as well as the discretion they permit, in the indirect auto lending industry, the Bureau discerned “a significant risk” that these existing policies would “result in pricing disparities on the basis of race, national origin, and other prohibited bases.”
Letter highlights. In his opinion letter on behalf of the GAO, Armstrong observes that Toomey had asked whether the CFPB’s March 2013 bulletin “is a rule for purposes of the Congressional Review Act.” In concluding that the CFPB bulletin “is a general statement of policy and a rule under the CRA,” the GAO letter underscores that CRA requirements may sometimes apply to general statements of policy.
In particular, the letter notes that the CFPB bulletin:
- provides information on the manner in which the CFPB plans to exercise its “discretionary enforcement power;”
- expresses the Bureau’s views that certain indirect auto lending activities “may trigger liability” under ECOA;
- advises the public “prospectively” of the manner in which the CFPB proposes to exercise its discretionary enforcement power;
- sets forth the Bureau’s expectations that indirect auto lenders “take steps” to ensure that their practices do not result in “pricing disparities on prohibited bases;”
- is designed to prescribe the Bureau’s policy in enforcing fair lending laws regarding indirect auto lender markup and dealer compensation policies; and
- asserts that the Bureau “did not raise any claims” that its bulletin would not be a rule—for instance, that the bulletin fell within the CRA’s specified “rule” exceptions.
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