DETROIT (Oct. 16, 2013) - David Westcott, chairman of the National Automobile Dealers Association, today warned that the Consumer Financial Protection Bureau's lack of transparency and unresponsiveness to Congress could end up hurting consumers by increasing the cost of auto loans.  

"More and more members of Congress are questioning the CFPB's so-called 'fair lending guidance' that seeks to eliminate dealer-negotiated financing and replace it with a flat fee method of compensation, where dealers are not allowed to discount the financing they offer," he added.

Westcott said pressure from the CFPB to force finance sources into adopting flat fees would eliminate a dealer's ability to "meet or beat" a given rate, and could increase the cost of credit for millions of consumers.

"When it comes to indirect lending, dealers are 'price discounters.' We don't understand how removing 17,546 price discounters from the marketplace is a good thing for consumers," he added. "And we don't see how tampering with a $783 billion auto lending market-that's working effectively and efficiently-is a good thing for consumers either."

The Dealer Franchise Network Creates Competition

Westcott, a Buick-GMC dealer in Burlington, N.C., also highlighted the numerous consumer benefits of the dealer franchise network, which has been the subject of recent debate.

"Competing against other dealers keeps us customer focused-from financing and servicing vehicles to warranty and safety repairs," he added. "If manufacturers were allowed to squeeze out the independent dealers, the competition we create will give way to a handful of national and international corporations-controlling pricing in your local community-because there will no longer be intra-brand competition."

Westcott said the consumer is the primary beneficiary of the dealer franchise network, which is why all 50 states have enacted some form of a dealer franchise law.

"The dealer franchise network creates competition, offers convenience and saves consumers money, while making a complex system seamless for car buyers."

Dealers Provide Essential Services

Westcott listed the essential services dealers provide that are either required by the government or demanded by the consumer, including car and parts inventories, trade-ins, financing, titling and registration, safety recalls, warranty work and service.

"New-car dealers serve their customers for the entire ownership experience," he added.

Westcott noted that the dealer franchise network costs hundreds of billions of dollars to create. And it would cost even more to recreate, which is exactly what would be necessary if it were eliminated. Automakers would have to take on this role and all the costs associated with it, he said.

Read more about CFPB and Dealer-Assisted Financing at www.nada.org/cfpb.