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GAO Finds that the CFPB’s 2013 Bulletin on Indirect Auto Lending is a Rule for Purposes of the Congressional Review Act.

On December 5, 2017, the U.S. Government Accountability Office (“GAO”) issued a letter finding that the Consumer Financial Protection Bureau’s March 21, 2013 Bulletin on Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act is a “rule” for the purposes of the Congressional Review Act (“CRA”), and therefore should have been submitted to Congress for approval.  The GAO letter responds to a request from Senator Patrick Toomey for guidance on whether the 2013 Bulletin is subject to the CRA. In response to GAO’s finding, Senator Toomey stated:

“GAO’s decision makes clear that the CFPB’s back-door effort to regulate auto loans, which was based on a dubious legal justification, did not comply with the Congressional Review Act. GAO’s decision is an important reminder that agencies have a responsibility to live up to their obligations under the law. When they don’t, Congress should hold them accountable. I intend to do everything in my power to repeal this ill-conceived rule using the Congressional Review Act.”

The 2013 Bulletin was controversial because it interpreted the fair lending laws to hold indirect auto lenders responsible for the potential fair lending violations of auto dealers in connection with the origination of auto loans.  The 2013 Bulletin stated that the CFPB would use its supervisory and enforcement power against indirect auto lenders to address these alleged consumer harms.  Because the CFPB has no jurisdiction over auto dealers, which were explicitly carved out from the Dodd Frank Act, some critics charged that the agency was trying to do indirectly what it could not do directly.

The CRA applies to any “agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy.” The GAO concluded that because the 2013 Bulletin is a statement of general applicability as it applies to all indirect auto lenders, has future effect, and provides guidance on how the CFPB will enforce fair lending laws, the 2013 Bulletin falls within the CRA’s definition of a rule.  As a result the 2013 Bulletin should have been submitted to Congress as required by the CRA.

Since the 2013 Bulletin was never submitted to Congress, the guidance it provides may not be in effect until that step is completed, which, given the current leadership of the CFPB, may never occur.

© 2018 Covington & Burling LLP


About this Author

Andrew M. Smith, Covington Burling, Data and cybersecurity lawyer

Andrew Smith advises clients on retail financial services, credit reporting, privacy, technology and e-commerce issues. He assists banks, non-bank lenders, credit bureaus, technology companies, and their vendors with regulatory compliance, litigation and transactional matters.

Mr. Smith represents clients before federal and state agencies—particularly the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB)—in law enforcement and rulemaking proceedings. He regularly advises companies on the requirements of the GLBA, FCRA, DPPA, ECOA,...

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Ethan (Eitan) Levisohn, Litigation attorney, Covington
Special Counsel

Eitan Levisohn's practice is focused on advising banks and financial services firms on enforcement matters before federal and state agencies, as well as providing regulatory counsel to firms evaluating current products and services or looking to offer new products and services and enter new markets. He also conducts industry trainings on cybersecurity and data protection issues and risks, particularly as they relate to consumer protection, including the use of the FFIEC Cybersecurity Assessment Tool. Mr. Levisohn has extensive experience investigating and litigating civil and criminal matters, including matters concerning the Dodd-Frank Act.

Before joining the firm, Mr. Levisohn was one of the first dozen employees in the Office of Enforcement at the Consumer Financial Protection Bureau (CFPB), where he helped establish the office and led investigations into potential violations of consumer financial protection laws, including UDAAP, the MAP Rule, and the FTC's Endorsement Guide. He also supported supervisory exams at the Bureau and has experience in a wide range of consumer financial markets, including credit reporting, mortgage origination and advertising, mortgage servicing, deposit products, student lending, student loan servicing, and title insurance.