This week, AFSA and other trade organizations filed an amicus brief in support of a vehicle finance company facing an enforcement action from the CFPB, which is attempting to amend settled law that the financial services industry has operated under and relied on for decades and is outside of the formal notice-and-comment rulemaking process via a suit against a single finance company.

The brief points out that the Supreme Court in its recent Loper Bright Enters. v. Raimondo, 144 S. Ct. 2244 (2024) decision, warned both administrative agencies and courts that agency actions must be limited to the authority granted to them by Congress.

The standards promulgated through litigation would create uncertainty not only for other vehicle finance companies, but also retail-sales finance sources in all sectors of the American economy, because the CFPB’s allegations attack such commercial practices as the use of retailer/dealer discounts that are widely used in many contexts. This would lead to decreased competition among members of the retail sales finance industry, higher financing costs, and a diminished availability of credit for consumers across a broad spectrum. Ensuring that the CFPB is not able to regulate through enforcement is crucial to preventing these costs to consumers. AFSA is very grateful to Troutman Pepper for their excellent work in writing the brief and for their support of the association.

The brief presents two arguments against the CFPB’s case:

First, the claims in this case continue a long-standing pattern of regulatory overreach by the CFPB.  The CFPB has made regulatory overreach a part of its operations in numerous instances since its inception, with this lawsuit being just one recent example.  As the first Director of the Bureau, Richard Cordray, commented, “[p]ushing the envelope is a loaded phrase, but that’s absolutely what we did.” In this latest example the CFPB asks the Court to disregard Congressional policy choices and mandate even more prescriptive ability-to-repay rules for other creditors on the theory that it is “abusive” not to evaluate credit applications in precisely the way the CFPB now announces they should be evaluated.

Second, the Bureau’s novel legal theories will detrimentally impact the ability of consumers to obtain credit and dismantle an important component of the U.S. economy. This case threatens to undermine the well-established commercial relationships in the indirect vehicle-finance industry and significantly restrict the availability of credit to consumers, particularly those in the subprime market.  Industry participants have relied on long-standing guidance and settled law in structuring their relationships, and the claims asserted by the CFPB represent an unjust attempt to penalize industry members for adhering to these principles.  By attempting to make finance companies liable for alleged dealer (or retailer) violations of the Truth in Lending Act and to characterize dealer discounts as per se hidden finance charges, the CFPB’s claims would make it riskier—and therefore less likely—for finance sources to make credit available to retail purchasers across the American economy.