This past Wednesday the House Committee on Financial Services’ Subcommittee on Oversight and Investigations held a hearing titled “Examining Discrimination in the Automobile Loan and Insurance Industries.” As the Majority Staff’s Hearing Memo noted, auto loan debt is the third largest category of household debt, after mortgages and student loans, and Americans now owe $1.26 trillion in auto loan debt.
Hearing witnesses noted a variety of concerns about the auto loan market, including: the average price for a used car reached a new high of over $20,000 in 2018; since 2009, the amount Americans owe on their cars has increased 75% (51% when adjusted for inflation); and the percentage of auto debt that is seriously delinquent, i.e., 90 days late or more, is the highest it has been since 2012, with more than 7 million Americans having missed at least three car payments.
While most members’ questions focused on disparities in pricing of auto insurance and the usage of non-driving factors contributing to such differences, several members posed questions related to auto loan discrimination. Unsurprisingly, such questions and arguments from members fell along anticipated lines, though there was some shared skepticism of the CFPB’s proxy method to identify probable race and ethnicity from Committee Ranking Member Rep. McHenry (R-NC) and Rep. Beatty (D-OH).
The subtext of the hearing, if largely unspoken, was Democratic members and the witnesses grappling with possible options moving forward given the 2018 Congressional Review Act override of the CFPB’s Bulletin 2013-2 which set forth the Bureau’s disparate impact theory of assignee liability for auto dealer “markup” disparities.
The witnesses at the hearing offered a number of recommendations for policymakers to consider to address disparities in the market for cars, including amending the Equal Credit Opportunity Act (ECOA) and its implementing Regulation B to enable and require the collection and analysis of race and ethnicity data for auto financing transactions and increased enforcement of the ECOA.
As we previously discussed, CFPB Director Kraninger recently stated that the Bureau will be holding a symposium on “disparate impact and the Equal Credit Opportunity Act” to “facilitate a robust discussion by experts . . . related to the Bureau’s mission in a public forum.” We will closely monitor this and other planned symposia and provide updates here.
The following witnesses appeared at the hearing:
- John W. Van Alst, Attorney, National Consumer Law Center; Director, Working Cars for Working Families, an NCLC project
- Rachel J. Cross, Policy Analyst, Frontier Group
- Kristen Clarke, President and Executive Director, Lawyers Committee for Civil Rights Under Law
- Joshua Rivera, Policy Advisor, University of Michigan, Poverty Solutions
- James Lynch, Chief Actuary, Vice President of Research and Education, Insurance Information Institute