This week, the American Financial Services Association (AFSA) and other trade organizations filed an amicus brief supporting a vehicle finance company facing enforcement action from the Consumer Financial Protection Bureau (CFPB). The CFPB is attempting to amend settled law that has guided the financial services industry for decades through a suit against a single finance company, bypassing the formal notice-and-comment rulemaking process.
The brief highlights that the Supreme Court, in its recent Loper Bright Enters. v. Raimondo decision, cautioned administrative agencies and courts to limit agency actions to the authority granted by Congress.
According to the brief, standards established through litigation would create uncertainty not only for vehicle finance companies but also for retail-sales finance sources across various sectors of the American economy. The CFPB’s allegations challenge commercial practices such as retailer/dealer discounts, widely used in many contexts. This could lead to decreased competition within the retail sales finance industry, higher financing costs, and reduced credit availability for consumers. Ensuring that the CFPB cannot regulate through enforcement is crucial to preventing these costs to consumers. AFSA expressed gratitude to Troutman Pepper for their work on writing the brief and supporting the association.
The brief presents two main arguments against the CFPB’s case:
First, it argues that this case continues a pattern of regulatory overreach by the CFPB since its inception. Richard Cordray, former Director of the Bureau, commented: “Pushing the envelope is a loaded phrase, but that’s absolutely what we did.” In this instance, the CFPB asks the Court to disregard Congressional policy choices and impose more prescriptive ability-to-repay rules on creditors based on its interpretation of what constitutes "abusive" practices.
Second, it contends that these legal theories will negatively impact consumers' ability to obtain credit and dismantle an essential component of the U.S. economy. The case threatens established commercial relationships in indirect vehicle-finance and could significantly restrict credit availability for consumers, especially those in subprime markets. Industry participants have relied on long-standing guidance and settled law in structuring their relationships; thus, penalizing them based on new interpretations would be unjust. By attempting to hold finance companies liable for alleged dealer violations of Truth in Lending Act provisions and characterizing dealer discounts as hidden finance charges, these claims could make it riskier—and less likely—for finance sources to extend credit across various sectors.