Auto finance bill puts dealers against military and consumer groups

Auto finance bill puts dealers against military and consumer groups

 

WASHINGTON -- A new Senate proposal to exclude dealer-assisted financing from oversight by a new consumer protection agency is pitting auto dealers against military and consumer groups in a lobbying battle.

Dealers contend they don't need another layer of regulation. But groups representing current and former members of the armed forces and their families say military families need protection from “unscrupulous dealers.”

Dealers are supporting an amendment by Sen. Sam Brownback, R-Kan., to the bill that would overhaul financial regulation. The legislation was introduced by Senate Banking Committee Chairman Christopher Dodd, D-Conn., with the backing of the Obama administration.

The bill would create an agency under the Federal Reserve Board to regulate financial products such as mortgages, credit cards and debit cards.

This week, the National Automobile Dealers Association urged members to ask their senators to support the Brownback amendment. Yesterday, NADA said it is helping organize a fly-in of dealers on April 26 to meet with their senators in Washington.

Another layer

“Adding another layer of regulation will limit availability of credit and increase costs to consumers,” NADA Chairman Ed Tonkin said in a statement.

NADA sent members an issue brief saying dealers “are already effectively regulated” by the Federal Reserve, the Federal Trade Commission and state consumer protection agencies.

Senate Majority Leader Harry Reid, D-Nev., has said he would like to bring the bill to the floor as early as next week. The legislation seeks to prevent another financial meltdown and protect consumers from predatory lenders.

Also yesterday, military groups representing more than 5.5 million current and former service members and their families urged Senate leaders to oppose the Brownback proposal.

The amendment would “allow unscrupulous dealers to continue to take advantage of service members and their families,” said the letter from the Military Coalition, which encompasses the National Military Family Association, the Veterans of Foreign Wars and the Gold Star Wives of America.

Attached to the groups' letter was a Feb. 26 letter from Undersecretary of Defense Clifford Stanley backing new federal oversight of dealer-assisted financing.

Financial obligations

A Pentagon poll found that 72 percent of 659 military installation counselors and lawyers said they had counseled service members in the past six months on auto financing issues such as bait-and-switch financing, falsification of loan applications and discriminatory lending, the Defense Department letter said.

“Auto financing represents the most significant financial obligation for the majority of service members, particularly in the junior enlisted grades,” the Pentagon letter said.

The House already has passed an overhaul of financial regulation that includes the creation of an independent consumer protection agency. But dealer-assisted financing would be exempt from oversight by this agency under an amendment sponsored by Rep. John Campbell, R-Calif.

Any differences between bills that pass the House and Senate would have to be resolved by a conference of congressional leaders.

Source: [ Automotive News ]