From financial reform, House Dems seek auto dealer exemption

It was reported by the Hill blog that 62 House Democrats are urging lawmakers to pursue an auto dealer exemption in light of upcoming financial reforms being considered by the Consumer Financial Protection Agency (CFPA). The movement, organized by New York Reps. Bill Owens and Mike McMahon, goes against the wishes of the White House, Defense Department and Treasury Department. It would effectively shield auto finance companies from CFPA oversight and let all of the auto dealers maintain the freedom to set lending rates and continue to utilize industry-standard lending practices. Auto dealers will only be able to continue offering dealer-assisted financing if the really bright red tape is kept to a minimum, argue pro-auto industry groups.

Article Source: House Dems seek auto dealer exemption from financial reform by Car Deal Expert

Is the Auto dealer exemption about helping customers?

According to BNet.com, the proposed auto dealer exemption from CFPA financial reform may save dealers money and allow them to pass the savings on to consumers in the form of lower auto finance rates, but the potential dark side cannot be ignored. The auto finance industry can definitely be considered a big business. There is a lot of evidence to suggest that potential gains from the subprime market have seduced auto dealers into lower their auto loans underwriting standards. Their fee structures also got the attention of the Better Business Bureau on numerous occasions, says the National Consumer Law Center.

Unfair advantage over other lenders for auto dealers

An auto dealer exemption would give dealerships an unfair advantage over banks, credit unions and other auto loans outlets, according to BNet. As the CFPA would have the power to set rates for everyone outside of dealer-assisted finance circles if the exemption were to pass into law, car dealers could exploit this for their own gain. Customers would likely not get the best deal from aggressive dealer finance groups. If a dealership were to close in a bad economy, they would also be able to violate any agreement terms more easily without CFPA supervision. A great example of this is failing to pay off existing loans on a trade in. Consumers deserve better protection than that, argues BNet; the FTC and government agencies already in place have proved insufficient in their efforts to stand up for Joe Car Buyer.

Consumers are largely uninformed about dominant dealer assisted financing

Knowing that there are better options is how we get the best deal on auto loans. The non-partisan Cambridge Winter Center for Financial Institutions Policy recognizes that “auto dealers actively market and price borrowers’ loans,” which is why so many consumers buy into their product. A level playing field would probably make it easier for consumers to find the auto loans that are right for them, without worry of exploitation. Giving the Consumer Financial Protection Agency jurisdiction over auto finance would conceivably make that a reality.

Additional information at these websites

BNet.com

industry.bnet.com/financial-services/100010096/financial-reform-five-reasons-why-we-need-protection-from-car-dealers/

The Hill

thehill.com/blogs/on-the-money/banking-financial-institutions/103917-house-democrats-push-for-auto-dealer-exemption

President Obama’s initial call for financial reform:

youtube.com/watch?v=o-D3Pfa-ViY