[NOTE: This post has been updated to include a statement from Rep. Tulsi Gabbard and my response to it.]
There’s this Nov. 20 Huffington Post story that’s getting shared around social media. It carries the incendiary title “Meet The 88 Democrats Who Just Voted To Enable Racial Discrimination In Car Buying,” and it packs quite a punch. The story concerns House Resolution 1737, which is a very simple bill that negates a Consumer Financial Protection Bureau (CFPB) bulletin from 2013 that helps ensure auto lenders don’t discriminate on the basis of gender, race, religion, age and so on.
The bill passed the House of Representatives on Nov. 18 by a vote of 332 to 96. As the Huffington Post story noted, 88 Democrats voted for it. One of those Democrats was Rep. Tulsi Gabbard, who represents Hawaii’s 2nd District (she was also one of the bill’s co-sponsors).
This is problematic for at least two big reasons. First, and most importantly, because auto lenders in this nation have great power to discriminate when providing loans. The CFPB bulletin from 2013 makes this explicitly clear:
The supervisory experience of the CFPB confirms that some indirect auto lenders have policies that allow auto dealers to mark up lender-established buy rates and that compensate dealers for those markups in the form of reserve (collectively, “markup and compensation policies”). Because of the incentives these policies create, and the discretion they permit, there is a significant risk that they will result in pricing disparities on the basis of race, national origin, and potentially other prohibited bases.
Racist car loan policies run against every civil rights ideal you can name. For this reason, the CFPB bulletin urged the imposition of “controls on deal markup and compensation policies,” “monitoring and addressing the effects of [compensation] policies” and “eliminating dealer discretion to mark up buy rates.” The last paragraph of the bulletin is especially pointed:
The CFPB will continue to closely review the operations of both depository and non-depository indirect auto lenders, utilizing all appropriate regulatory tools to assess whether supervisory, enforcement, or other actions may be necessary to ensure that the market for auto lending provides fair, equitable, and nondiscriminatory access to credit for consumers.
According to the Huffington Post story, this didn’t sit well with banks and auto dealers, which lobbied intensely for HR 1737. Now you’d think that opposition to the bill from groups like the NAACP, the Urban League and National Council of La Raza would be enough to sway progressives like Rep. Gabbard. But apparently no.
Look, we like Gabbard. She’s very liberal on social issues and environmental matters, and her extensive military experience has led her to provide valuable insight into U.S. foreign policy–especially in matters of war. So why the vote for HR 1737, which is nothing more than a big wet kiss on the cheek of big banks and auto dealers? Especially when, on Mar. 7 of this year, she said this on the 50th anniversary of the “bloody Sunday” protest march on the Edmund Pettus Bridge:
We remember that the moral arc of the universe bends toward justice, but only when we all stand up and speak out against bigotry and discrimination. As a nation, we must honor the memory of those courageous souls who marched on Selma, by continuing their work, and living aloha–treating all people with respect, compassion, and love. While times have changed, unfortunately we still see examples of bigotry, harassment, and discrimination in our country. Let this important day be a reminder that it is imperative that we understand and uphold the importance of protecting these sacred civil rights and equal treatment for all.
Those are wonderful and welcome words, but they conflict with Gabbard’s voting for HR 1737. As for explaining Rep. Gabbard’s vote, her spokesperson
hasn’t respond to a phone message or email inquiry asking for comment finally got back to me on Nov. 27 with the statement below. It’s somewhat lengthy, but I’ll reprint it in full:
I have been a strong advocate for the Consumer Financial Protection Bureau (CFPB), and have supported their work throughout my time in Congress. On this issue, I heard from many Hawaiʻi auto dealership owners who expressed frustration and concern about this particular CFPB rule and the lack of information on what caused it, how they are to comply with it, and the unintended negative consequences it would have on our communities. I requested the details and analysis CFPB took into account before issuing this guidance, but received no response.
That’s why I joined 54 of my Democratic colleagues, including 16 members of the Congressional Black Caucus or Congressional Hispanic Caucus, in co-sponsoring HR1737, a bipartisan bill that would ensure that CFPB regulations related to auto loans would be transparent, allow a public comment period, and would share information about why the regulation is necessary and the impact it will have. This legislation only affects indirect lenders, such as auto dealers and community banks, and would allow CFPB to continue to do its job, while engaging the community in the process.
I support CFPB’s work to prevent discrimination, which should not be tolerated in any form. But this policy would actually have a negative impact on all consumers, including minorities, by restricting access to credit and eliminating the buyer’s ability to receive a discounted auto loan. The Department of Justice’s Civil Rights division is committed to protecting consumers from discrimination, and the Congressional Budget Office has stated that this legislation will not in any way inhibit enforcement of the Equal Credit Opportunity Act.
This sounds great, but it’s also pretty much exactly the line taken by organizations representing auto dealers National Automobile Dealers Association (for instance, this recent op-ed from the National Automobile Dealers Association president also states that HR 1737 would make things more “transparent”). Their idea was to turn the issue around from racially motivated lending practices to robbing minorities of discounted loans.
The reality is different. The bipartisan nature of HR 1737 not withstanding, a large coalition of civil rights groups opposed HR 1737. On Nov. 17 of this year, a coalition of 24 organizations that included the NAACP, the National Urban League, the A. Philip Randolph Institute and the Center for Women Policy Studies issued a statement denouncing HR 1737. Their reasons stemmed directly from a history of discrimination–a history that compelled the CFPB to act.
In the mid-1990s, a series of lawsuits were filed against the largest auto finance companies in the country alleging discrimination. The data from those lawsuits showed that borrowers of color were twice as likely to have their loans marked up, and paid markups twice as large as similarly situated white borrowers with similar credit ratings.
Because of that history, and with current data showing continued discrimination, the CFPB has issued guidance telling lenders that they could eliminate the risk of fair lending violations by paying compensation to dealers in ways that do not involve manipulations of the interest rate. If, however, lenders chose to continue allowing dealers to increase the interest rate for compensation, then the lender would need to take steps to ensure that discrimination does not occur.
No, HR 1737 is still a bad bill, regardless of the bipartisan support it received in Congress.
Photo of Rep. Gabbard at a 2013 civil rights luncheon courtesy her office