In her analysis of Republican efforts to pare down the regulatory state, Vox’s Emily Stewart left out important details about problems with legally dubious, regulatory overreach under the Obama administration, accusing the GOP of blithely implementing their “new favorite deregulatory toy.”
Vox’s piece, “The GOP is about to scrap safeguards that stop auto lenders from discriminating based on race,” highlights reforms the GOP is seeking at the Consumer Financial Protection Bureau that Vox says would stop rules “meant to stop car dealers from charging more for car loans based on race.” She cites union, consumer and civil rights groups opposed to the GOP move.
Vox doesn’t mention, as The Wall Street Journal highlights, that “Dodd-Frank expressly prohibited the Consumer Financial Protection Bureau from regulating auto dealers. That didn’t stop former CFPB chief Richard Cordray, who used the back door of auto-financing to regulate dealers. He set about trying to show that minorities pay higher interest rates than whites on vehicle loans facilitated by car dealers.
“But since dealers are barred by law from collecting data on race, Mr. Cordray used statistical models to guess the race of borrowers based on surnames and addresses. In 2013 the CFPB issued ‘guidance’ requiring lenders and dealers to change their practices to account for ‘disparate impact’ based on whether borrowers were, say, a Johnson (black) or an O’Hara (must be white). The ‘guidance’ ruse also let Mr. Cordray duck the rule-making process with its formal public-notice period. The bureau proceeded to use the rule to charge discrimination and coerce settlements from auto lenders.”
Vox also doesn’t mention voices like that of Dennis Shaul, CEO of the Community Financial Services Association of America, who worked as an aide to then-Rep. Barney Frank, chairman of the House Financial Services Committee when the Dodd-Frank Act of 2010, which created the CFPB, was written. Shaul has since been critical of the CFPB’s regulatory overreach.
“I realized that no bill is ever perfect and the CFPB would have its imperfections,” Shaul wrote in a WSJ opinion column. “The authors wanted the bureau to be a fair arbiter of protecting consumers, instead of what it has become—a politically biased regulatory dictator and a political steppingstone for its sole director, who is now expected to run for governor of Ohio … Even though the Dodd-Frank Act expressly prohibits the CFPB from regulating automotive finance, the agency jumped into the field, alleging discrimination in auto lending.
“Because federal law prohibits auto lenders from gathering information on race, the agency had to guess at its claim of discrimination based solely on names and ZIP Codes, which the agency itself admitted as flawed and which one observer described as the equivalent of a student guessing on every answer on his SATs. The agency then went ahead with guidance that raised the costs of an average auto loan by an estimated $600.”
Vox doesn’t cite the problematic costs to all auto consumers of the CFPB’s actions, and it also doesn’t mention New York Federal Reserve data showing that “Auto loans are going bad despite strong employment, a sign that lending standards were too loose.”
In this piece, Vox makes discusses what a progressive policy is “meant” to do — its intention, rather that its outcome — typically, a negative unintended consequence.