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Congress Cracks Down On Lending, But Car Dealers Squeeze Through

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Used car salesman

Used car salesman

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Car dealers, at least for now, don't have to answer to the same regulations, restrictions, and oversight that would apply to nearly every other type of consumer lending.

After the House of Representatives voted to exclude auto loans earlier this week, the Congressional committee negotiating a final version of the financial-regulation bill, together with the Senate version that passed last month, agreed on a provision that would exempt auto dealers from Consumer Financial Protection Bureau oversight. The bill goes to the House and Senate for votes next week, where it's expected to pass and be signed into law by President Obama.

The move represents a full victory for auto dealerships and specifically the National Automobile Dealers Association (NADA), which had been lobbying hard in recent weeks to make sure that dealers aren't overseen by the Consumer Financial Protection Bureau, the new consumer-finance agency that looks after the mortgage, credit-card, and consumer loan industries—including the often-criticized payday loan business that's still given a long leash in some states.

“The goal all along was to keep a new, untested government agency from creating burdensome and unnecessary rules that would make it harder and more expensive for car buyers to access auto credit,” NADA spokesman Bailey Wood said, prior to the final word on the exemption.

Bill could have put the squeeze on sales, dealers argue

Auto dealers have consistently argued that any more regulation in this area would put a sizable dent in their business and potentially reduce the number of people who are qualified (or able) to purchase a vehicle, and that with all the economic difficulties in the industry, this is not the time to do it. Main Street shouldn't be given the same treatment as Wall Street, a number of Senators successfully argued last month.

Up until last night, there was still a chance that the new agency would maintain some limited authority for rulemaking affecting dealers.


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Comments (7)
  1. Because auto dealers aren't as sleazy as mortgage brokers?
     
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  2. Where is the dealer from the photo live?
    I know a girl here that would love to pay him a visit. She need a new Ford Fiesta...
     
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  3. So is there any real logic to the bill, or is it just that bankers need to be publicly spanked and car dealers already look put-out?
     
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  4. Ideally there's a balance in there in having some regulation of predatory lenders and giving people the opportunity to finance a car they can reasonable afford.
     
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  5. In a perfect world people would behave sensibly and you wouldn't need regulation, but in case you haven't noticed - we do not live in a perfect world, not at all...
     
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  6. The area of dealerships that needs attention is service-that's where consumers really need to watch getting ripped off.
     
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  7. Most of the time its not the dealers that are making the loans. They use outside banks and credit unions that may charge high lending fees that are passed on to the consumer. Some finance companies charge as much as 25% of the amount financed as a fee to the dealership to finance the car. That fee is in turn passed on to the customer. So the car that should have been sod for $10,000 is now sold for $12,500.
     
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