Rescission of CFPB Lending Guidance Does Not Erase Credit Discrimination Risks

Paul R. Norman | 05.11.18

Although Congress has passed, and the President has signed, a resolution to rescind the CFPB’s guidance on auto lending discrimination, automobile dealers still need to monitor their credit policies to avoid potential legal problems. Even before there was a CFPB (which does not have direct jurisdiction over most auto dealers), the US Department of Justice sued automobile dealers for alleged violations of the Equal Credit Opportunity Act (ECOA), asserting that dealers that charged minority customers higher interest rates on auto loans than nonminority customers with similar credit were charged. Like the CFPB guidance, the DOJ charged that ECOA violations could occur even if no discrimination was intended, if a review of the dealership’s credit sales showed a pattern of discrimination. The rescission of CFPB’s guidance does not prevent courts from accepting this argument in future DOJ or private class action (ECOA has a private right of action that does not depend on governmental action) against auto dealers.

In 2015, NADA developed a fair credit risk mitigation program aimed at helping dealerships defend against credit discrimination claims. The program is available on the NADA website at www​.nada​.org/​f​a​i​r​c​redit. Notwithstanding the recent action of Congress, dealers who have implemented a fair credit compliance program should not abandon it and dealers who haven’t should still consider doing so.