Auto Lender Lobbyists’ Last Stand in the Senate

By The White House on 05/24/2010 – 12:12 pm PDT -- Headlines

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Riso and Whited turned that offer down and the dealer repossessed the Sonata. They told him to give back the more than $500 they had made in payments, along with Riso’s Focus.

"And he said, ‘Oh no, you’re never going to see your Focus again. Your car was repossessed for nonpayment and you can pay me $800 to get back in this contract,’ " Riso says.

In a letter to the Treasury Department last February, Clifford Stanley, the Undersecretary of Defense also raised concerns about the impact the “unscrupulous practices” of auto dealer-lenders on military families. Army Secretary John McHugh recently sent a letter to Senate Banking Committee Chairman Christopher Dodd, D-Conn., “voicing his objection to Brownback’s amendment." As that same story notes, "Holly Petraeus, wife of U.S. Central Command chief Gen. David Petraeus, also joined the fight. As director of the Council of Better Business Bureau’s Military Line Program, she reiterated assertions that many service members are in financial trouble with their auto payments, locked into loans with interest rates of 15 percent or higher.”

The dealer-lenders who engage in such deceptive behavior are struggling to hold on to the unfair advantage that they have over hardworking americans and responsible dealer-lenders. According to recent news reports, lobbyists and allies of Wall Street are not letting up and they plan to throw millions of dollars toward efforts to weaken provisions including an auto dealer carve out in the bill as it moves to conference.
While the Senate passage last week was a significant step forward for the bill, the President will not rest as attempts are made to weaken the bill.

Jen Psaki is Deputy Communications Director

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CJR

Those practices are alrady illegal under state and federal law, addding another layer of government bureaucracy will not stop bad players from those practices – Attorney General investigations and lawsuits in the states will shut them down with punitive damages. Why punish 99% of small businesses with new expensive and burdensome regulations for the problems at 1% of the businesses – is this really your view of how the federal government should get involved in citizen’s every day life?
Ray Ingalsbe

You are correctly calling them “auto dealer lenders” as it is the dealers themselves who are the creditors in their installment transactions. And, it is the dealers alone who illegally cancel the installment contract on the false claim that “the bank rejected your credit.” The “bank” may have refused to accept assignment of the contract at the amount of financing requested by the dealer, which means that the proposed assignee wouldn’t buy the dealer’s obligation at the profit margin the dealer built into the contract. The dealer in turn refuses to give up a dollar in profit and chooses instead to defraud the buyer bu calling her back to the dealership and demanding more money in downpayment so as to maintain its profit margin or, worse, to increase its profit. This is actual theft and it occurs thousands of times a day across the country. It’s euphemistically called “spot delivery”. It is criminal fraud, and the Brownback amendment is an attempt to perpetuate this fraud.

I am a consumer lawyer and I deal with this dealer fraud on a daily basis and have written legal memoranda on the subject. Dealers say that they are “arranging” loans. It is a lie. Any proposed assignee is not a creditor under the Truth in Lending Act. For example, Bank of America is a “creditor” only when the consumer dealls directly with the bank. In dealer installment transactions, Bank of America is an “assignee”, not a creditor. See the Official Staff Commentary on Regulation Z at 12 C.F.R. s. 226.2(a)(17) “Assignees.”

Please do whatever you can to defeat the Brownback proposal exempting auto dealers from th Consumer Finance Protection Bill.