While you were talking about President Trump’s latest tweets, the Senate voted this afternoon to overturn federal rules designed to stop discrimination against African Americans and other minorities when they sign up for auto loans. If the bill also passes the House of Representatives and receives Trump’s approval — two things that are extremely to happen — the current rules against discrimination in auto loans will be substantially weakened.
And that’s not even the worst thing about this vote.
The auto loan discrimination repeal effort actually reflects a larger change that Trump and Republicans are pursuing, one that is driving a new and frightening GOP campaign to reverse Obama-era gains in consumer and other regulatory protection.
“This is a new tactic to strip the effectiveness of regulations long after they were put in place,” Joe Valenti, the director of Consumer Finance at the Center for American Progress, told me today. “I think we will see this as a frequent procedural move to undercut any type of regulation.”
What is that procedural move? Well, the change involves a new interpretation of what’s known as the Congressional Review Act. This is a law which gives Congress 60 legislative days after a federal regulation or rule is adopted to overturn it by a simple majority vote (getting around a Senate filibuster) and presidential sign-off.
Not all the federal requirements we collectively think of as laws actually originate as bills passed by Congress. Many are instead what are called regulations. Regulations are created by agencies like the Consumer Financial Protection Bureau or the Environmental Protection Agency as they seek to implement laws. They require a public review process.
By contrast, informal guidance issued by agencies shapes how those agencies interpret laws and regulations, but doesn’t require a review process. The auto loan discrimination provision in question was issued as a guidance by the Consumer Financial Protection Bureau, which was created by the Dodd-Frank financial reform.
But late last year, the Government Accountability Office, after studying the issue at the request of Pennsylvania GOP Senator Patrick Toomey, issued a ruling that said the provision should have been treated as a regulation, which makes it subject to a Congressional effort to repeal it, something we’re now seeing.
This change, if used on other fronts, could make it easier to repeal many other provisions that have been implemented by agencies, thus potentially enabling Republicans to overturn a good deal of consumer, environmental and other regulatory protection.
The auto loan provision was not a small thing. The CFPB had issued it in 2013 after the agency found many auto dealerships — which frequently act as a middleman between banks and financial services firms offering auto loans and the consumers who want or need them — were adding higher fees and service charges to contracts signed by their minority customers.
Now this protection is likely to be scrapped. But this sort of discrimination remains an ongoing problem. The National Fair Housing Alliance released a study showing about two thirds of minority would-be auto-purchasers encountered discriminatory treatment from the car dealerships they studied.
Now Republicans are poised to expand this tactic. And It’s not just progressives who are warning of the potentially severe impacts of such an effort. As Charles Gabriel, president of Capital Alpha Partners, a Washington-based investment research firm, puts it: “Republicans feel they have opened up a pretty rich vein here, given this interpretation from the GAO allows them to put at risk regulations that have been in place for years, if not decades.”
In other words, it’s possible that many other long-standing regulations will suddenly be in the cross hairs of Trump and Republicans. We will soon find out how much damage this clever new procedural tactic can do.