A U.S. Senator has asked the Government Accountability Office to look at the Consumer Financial Protection Bureau’s indirect auto finance guidelines.
Sen. Pat Toomey sent a letter to the GAO asking the oversight agency to the CFPB overstepped its authority when it created these guidelines.
The CFPB claims the guidelines only clarify existing rules. Toomey seems to assert that the guidelines are such a broad interpretation that they create a new rule.
In that case, it would be subject to the Congressional Rule Act. Congress could nullify this rule if that’s the case.
Toomey’s office didn’t respond to a request for an interview.
Alan Kaplinsky, an attorney with Ballard Spahr, hasn’t seen the letter himself, but did read about its content in a banking trade journal and is familiar with the arguments that lead up to it.
Kaplinsky said several banks and finance companies expressed concerned about the indirect auto finance rule.
So have auto dealers, who see the rule as a way to get around their exemption in the Dodd-Frank Act that created the CFPB.
“(The CFPB) felt they could go through the backdoor by going after the banks and other companies that were providing the finance for credit auto sales,” Kaplinsky said.
Kaplinsky said there is a good change Congress would nullify the rule if it gets that far. It has done so with 14 other regulations.
The nullification would not mean auto dealers are free to do as they please, but it could rein in the CFPB.
“It would send a message to the CFPB that they should tread very lightly in this area,” Kaplinsky said.
This is especially important since the CFPB will have a new director within the next year.