Dealers to Conferees: Auto Dealer Language is Pro-Consumer and Prevailed in Both the House and Senate



WASHINGTON (June 4, 2010) - The National Automobile Dealers Association (NADA) urges House and Senate conferees to keep finance options for car buyers affordable and accessible when considering legislation to overhaul the nation's financial system.  

“The House and Senate sent a very clear and bipartisan message that Main Street auto dealerships should not be in a Wall Street reform bill,” says David Regan, NADA vice president of legislative affairs.

During consideration of the Wall Street reform legislation, members of Congress voted to keep in place the sound regulatory structure that has allowed millions of consumers to buy new vehicles at competitive interest rates instead of creating an uncertain regulatory regime under a new agency.

Late last year, a strong bipartisan majority in the House Financial Services Committee voted 47-21 to support an auto dealer amendment, sponsored by Rep. John Campbell, R-Calif, which seeks to keep dealer-assisted financing a competitive option for auto shoppers. The amendment was retained in the final House bill.

On May 24, the Senate, by an overwhelming bipartisan margin (60-30), voted to support a “motion to instruct the conferees” offered by Sen. Sam Brownback, R-Kan., to keep the auto dealer language in the conference report.

“Auto dealerships are not banks. Dealers help consumers find affordable credit by arranging financing through a network of third-party lenders,” Regan said. “Dealerships do not underwrite, fund or service auto loans or leases and those that do will be subject to the new agency's regulations, even under the Brownback/Campbell auto dealer language.”

Regan further emphasized that the new consumer agency proposed in the bill would have direct federal oversight over all auto loans. All banks, finance companies, credit unions and, dealerships that directly fund and service auto loans would also be regulated.

Regan said that false allegations by various groups were an attempt to confuse lawmakers, but many in Congress realized that the claims are without merit. For instance, baseless claims regarding dealer practices toward the military were dismissed because no data exists to back up the claims. In fact, when the Department of Defense presented a comprehensive report on predatory lending directed at the military in 2006, the report did not specifically identify dealer-assisted financing as a problem, instead focusing on payday loans, auto title lending, and refund anticipation loans. Click here for the report.

Similarly false claims alleging discriminatory practices also did not withstand scrutiny.  A study cited by opponents failed to factor in an individual's creditworthiness when determining a loan's interest rate.

Congress also recognized that the Brownback/Campbell auto dealer language preserves all existing state and federal consumer protection statutes and regulations that govern dealer-assisted financing. Dealers' retail financing activity would continue to be effectively regulated by the Federal Reserve Board and the Federal Trade Commission.

Regan urged the bill's conferees to remember that dealer-assisted financing is optional for car buyers and provides more convenience, more competition and more choices for consumers. Dealers' relationships with numerous lenders allow them to help consumers find more competitive financing. Often an automaker's captive finance company enables dealers to provide 0 percent financing, which banks and credit unions do not offer.

“The vast majority of Congress looked at the facts and clearly saw that auto financing did not cause the financial crisis,” Regan said. Auto financing is sound because lenders must look primarily to the borrower for repayment, since financing is secured by a depreciating asset (the vehicle). Since 2004, 60-day auto loan delinquencies have never exceeded 1 percent, even during the worst of the recent recession. Consumers win when they have multiple financing options. Conferees must keep auto financing affordable for consumers from all walks of life by keeping competition in the marketplace.” 

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