Car dealers and the Obama administration are involved in some push and pull that’s pitting the Pentagon against the dealers’ main street roots. Backed by Republican Senator Sam Brownback of Kansas, dealers are attempting to carve out an exemption from the administration’s proposal to initiate a new consumer protection program that’s intended to prevent fraud and abuse in car financing.
The New York Times reported that in 2008 52 percent of car dealers’ bottom line was made up of profit from financing and insurance. So the stakes are high if any regulation gets in the way of that cash stream. Dealers are emphasizing their connection to hometown America and their champion seems to be Senator Brownback, whose first target has been the military which would like to see the dealers remain in the initiative.
Senator Brownback wrote to Undersecretary of Defense, Clifford Stanley, seeking clarification of the Pentagon’s position concerning the impact of car dealer generated loans on military personnel. In addition, the Associated Press reported that Holly Petraeus, wife of U.S. Central Command Chief Gen. David Petraeus, weighed in on the other side. In her capacity as Director of the Better Business Bureau’s Military Line program she oversees consumer education and advocacy for service members and their families. She reportedly backed up Stanley’s assertions that military personnel often avail themselves of professional counseling as a result of abusive auto financing.
The Consumer Financial Protection Bureau is part of the broader Wall Street Reform and Consumer Protection Act that is being debated in Washington. Brownback’s opposition comes in the form of an amendment that would carve out the car dealers from regulation by the bureau. President Obama was quoted by Dow Jones Newswires as saying that Brownback’s amendment “guts” protections offered by the legislation and that the amendment “simply encourages misleading sales tactics that hurt American consumers.”
The prospect of being regulated in an area so vital to the car dealers has the industry talking about the consequences and calling on the National Automobile Dealers Association. The NADA spent $3 million last year on federal lobbying according to the New York Times. As far as the ramifications, some see the rural areas where financing can be difficult to secure the most effected by any regulations that encumber the dealers. At any rate, it’s likely that your next visit with your local car dealer’s finance manager may be quite different.