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The Senate yesterday moved to eliminate a 2013 consumer protection measure intended to combat discrimination in auto lending, marking an expansive new use of its power to kill federal regulations, Politico reported. The lawmakers voted 51-47 to gut the Consumer Financial Protection Bureau‘s guidance, which Republicans attacked as harmful to auto dealers and lenders. The House is expected to pass the measure soon, and President Donald Trump will likely sign it. The consequences of the vote will ripple beyond the confines of the CFPB, which is already on a deregulatory path under the leadership of Mick Mulvaney, Trump‘s White House budget chief. It was the first time the Senate has used its authority under the 1996 Congressional Review Act to strike down an action taken by an agency years ago, instead of just within the narrow window prescribed by the law. The move also marked a broadening of how Congress has generally used the Review Act to include regulatory guidance and not only formal agency rules that were recently issued.

Republicans in Congress have moved closer to rolling back an Obama-era regulation designed to prevent racial discrimination in auto financing, the Wall Street Journal reported. The Senate yesterday voted to proceed with legislation to overturn the 2013 guidance addressing lending practices at auto dealerships, one of the most controversial policies implemented by the Obama-era leadership of the Consumer Financial Protection Bureau. The procedural vote, approved 50-47 largely along the party lines, is seen as a proxy for the success of the final vote slated for tomorrow, according to congressional aides. The House is expected to approve its version of the legislation shortly thereafter. The lawmakers are targeting a CFPB regulation that curbed auto dealers’ ability to charge extra interest on certain loans. Alleging that some minority borrowers were charged more than white borrowers through a practice called “dealer markups,” the CFPB used the policy to impose tens of millions of dollars in fines on several auto lenders between 2013 and 2016, including Ally Financial Inc. and Toyota Motor Credit Corp.

Judges on a federal appeals court panel yesterday appeared hesitant to overrule President Trump and install the deputy director of the Consumer Financial Protection Bureau as the agency's temporary leader, the Los Angeles Times reported. But two of the three judges from the U.S. Court of Appeals for the D.C. Circuit indicated they had a problem with the person Trump selected to take the position, Mick Mulvaney, because he also heads the White House Office of Management and Budget. The 2010 law that created the bureau as an independent federal agency specifically said OMB should not have oversight or jurisdiction over it. That raised the possibility that the legal battle over the future of the watchdog agency could end with Mulvaney's removal as acting director — a move that would be cheered by Democrats and consumer advocates who have complained about his public opposition to the bureau's existence.

A leading trade group for small-dollar lenders yesterday asked a federal court to block rules that are meant to shield consumers from predatory loans, Reuters reported. Lenders cannot make loans to borrowers who do not have an ability to repay and lenders may not drain a borrower’s savings in order to settle a loan, according to rules for payday lenders issued in November 2017 by the Consumer Financial Protection Bureau. Those rules should be scrapped, the Community Financial Services Association of America (CFSA) argued in court. The payday lending rule “was motivated by a deeply paternalistic view that consumers cannot be trusted with the freedom to make their own financial decisions,” the trade group argued. Mick Mulvaney, President Donald Trump’s pick to lead the CFPB, has already said he intends to invalidate the payday rule as soon as possible. The case was brought in the U.S. District Court for the Western District of Texas, Austin Division.

The top U.S. watchdog for consumer finance is seeking a record fine against Wells Fargo & Co that could exceed several hundred million dollars for auto insurance and mortgage lending abuses, Reuters reported. The penalty would be the first issued by Mick Mulvaney, whom President Donald Trump tapped in November to head the Consumer Financial Protection Bureau (CFPB). The CFPB is readying sanctions alongside the Office of the Comptroller of the Currency (OCC), Wells Fargo’s day-to-day regulator. The agencies are ready to sanction Wells Fargo for layering extra insurance on drivers and collecting commissions on those policies, Reuters reported last month. Both agencies have also been investigating the bank for wrongly levying fees on mortgage borrowers.

Wells Fargo & Co. and Citigroup Inc. are unlikely to make a $14,000 auto loan to a borrower with a subprime credit score as that is now the domain of direct lenders such as Exeter Finance LLC, based in Irving, Texas. But Wells Fargo and Citigroup have helped lend Exeter $1.4 billion for that very purpose, according to a Wall Street Journal analysis. Bank loans to Exeter and other nonbank financial firms have increased sixfold between 2010 and 2017 to a record high of nearly $345 billion, according to the WSJ's analysis of regulatory filings. They are now one of the largest categories of bank loans to companies. Banks say that their new approach of lending to the nonbank lenders is safer than dealing directly with consumers with bad credit and companies with shaky balance sheets.

The vast majority of Senate Democrats are worried that acting Consumer Financial Protection Bureau director Mick Mulvaney is going to kill major new federal regulations on payday loans, the Washington Examiner reported. Forty-three Democrats wrote to Mulvaney yesterday not to undo the agency's payday loan rules, which he announced in January would be reconsidered. “The CFPB’s role in serving as a watchdog for American consumers while making our financial markets safe, fair, and transparent continues to be of critical importance," the Democrats wrote. "To this end, we urge you to end any efforts to undermine and repeal this critical consumer protection." The rule was finalized in October under an Obama holdout director, Richard Cordray. After being appointed by President Trump, Mulvaney, who also is the director of the Office of Management and Budget, took the first step toward revising or undoing the rule by giving notice that it would be reconsidered. He also eased off some of the agency's investigations of payday lenders.

The top cop for U.S. consumer finance has decided not to sue a payday loan collector and is weighing whether to drop cases against three payday lenders, Reuters reported. The payday loan cases are among about a dozen that Richard Cordray, the former agency chief, approved for litigation before he resigned in November. Cordray was the first to lead the agency that Congress created in 2010 after the financial crisis. The four previously unreported cases aimed to return more than $60 million to consumers. Three are part of routine CFPB work to police storefront lenders. The fourth case concerns who has a right to collect payday loans offered from tribal land. Cordray was ready to sue Kansas-based National Credit Adjusters (NCA), which primarily collects debt for online lenders operating on tribal land. The companies have argued such loans are permitted when they are originated on tribal land. The CFPB under Cordray concluded that NCA had no right to collect on such online loans, no matter where they were made. Mick Mulvaney, interim head of the Consumer Financial Protection Bureau (CFPB), has dropped the matter and the case is “dead,” Sarah Auchterlonie, a lawyer for NCA, told Reuters this week. She noted the agency appeared to be backing off issues involving tribal sovereignty.

The Consumer Financial Protection Bureau will team up with the Federal Trade Commission to police debt collectors as it shifts to a gentler form of enforcement under the Trump administration, the Wall Street Journal reported. CFPB Acting Director Mick Mulvaney announced the change Tuesday. Mulvaney, the White House budget director and a longtime critic of the CFPB, is revamping enforcement policy at the bureau. The CFPB’s aggressive stance under its previous Obama-appointed leadership had often caused friction with financial companies. Some Republican critics of the CFPB have called for shrinking the bureau sharply and merging its enforcement authority into the FTC’s, pointing to overlap in the two agencies’ mandates. Consumer groups and Democrats have advocated for strong independence for the CFPB, saying the FTC has few tools to regulate nonbanks, such as mortgage lenders, payday lenders and debt collectors. Mulvaney has said that he sees debt collection as an enforcement priority because the CFPB gets many consumer complaints about that industry, even as the bureau begins to ease its grips on other sectors such as payday lending.