Trump signs resolution killing rule intended to prevent racial bias in auto lending

Gregory Korte | USA TODAY

WASHINGTON – Auto dealers will once again be allowed to mark up the interest rates on auto loans to sell their cars — a practice critics say is racially discriminatory — after President Trump signed a bill striking down a rule discouraging the practice.

The Obama administration adopted the rule in 2013 in response to reports that black and Hispanic car buyers were paying higher interest rates on their loans than white car buyers. These "indirect" loans come from a third-party financial institution, which returns part of that higher interest rate back to the car dealership.

Lenders and car dealers say that system gives salesmen the flexibility they need to offer discounted auto loans to their best customers.

It's the 16th time Trump has signed a resolution to strike down a regulation under the Congressional Review Act, a formerly obscure law that allows Congress to have the final say over agency regulations.

The auto lending rule broke new ground, however, because it had been on the books for five years and wasn't technically a regulation.

Instead, it was a lower-level guidance document explaining how the Bureau of Consumer Financial Protection would enforce the anti-discrimination provisions of the Equal Credit Opportunity Act.

Ordinarily, Congress has 60 legislative days to overturn a rule under the Congressional Review Act, or it goes into effect. But because it was a guidance document, it didn't go through the normal regulatory process.

Car dealers, lenders and and other interested groups never had the chance to provide comments on the rule, and the Obama administration never submitted it to Congress for review.

It was only after prodding from Sen. Patrick Toomey, R-Pa., that the Government Accountability Office determined that the guidance was actually a rule and submitted it to Congress for review, allowing an up-or-down vote without possibility of a Senate filibuster.

The House voted to repeal the rule 234 to 175, and the Senate 51 to 47. Both votes were largely along party lines, with Democrats voting to keep the rule.

More: House poised to nix anti-discrimination rule as part of broader push to unravel Obama regulations

Under the Congressional Review Act, the bureau is not barred from issuing any similar rule unless Congress gives it specific authority.