By on October 23, 2009

sic...(courtesy:rushmoreresources.com)


The Detroit News reports that car dealers are trustworthy enough (or, more likely, influential enough) to be exempted from the House Financial Services Committee’s recently-passed version of the Consumer Financial Protection Act. The bill, intended to prevent another credit crisis through federal regulation, would have made dealers subject to Consumer Financial Protection Agency oversight had Rep John Campbell (R-CA) not introduced an amendment [PDF] exempting them. David Westcott, chairman of National Automobile Dealers Association’s government affairs committee applauded the move

It makes sense to exclude dealers. Dealers had absolutely nothing to do with the credit crisis. The overwhelming majority of committee members clearly understand that CFPA jurisdiction over dealers is unnecessary and that increased uncertainty in the auto marketplace would limit consumer finance options and increase car buyers’ costs

But the OC Watchdog and consumer group Common Cause are already laying into the Campbell amendment, pointing out that (in addition to his 25 years in the auto retail business), six dealerships pay rent to Campbell. In addition to the $600,000 to $6m in annual rent, Campbell also reportedly received $170,000 in campaign contributions from auto dealers since he’s been in congress. Campbell’s response:

First, he said, four of the six entities that paid him rent are no longer car dealers. They are body shops or real estate holding companies.

Second, Campbell said he hasn’t been involved in the car business for the past six years.

Third, he says he ran his amendment by the House ethics committee and was told it was not a conflict of interest for him to offer it.

Campbell said his amendment will not financially benefit car dealers. “All this is trying to do is save them from needless regulation. It’s not like it’s a tax credit, not like it’s stimulus money.’’

He may have point there, although vetting by the House ethics committee is as meaningless as a Ralph Nader presidential bid. Campbell did recuse himself in the vote on an auto industry bailout, because he said money would go directly to General Motors, a firm he has done business with for years.

But besides the potential conflict of interest, there’s the question of the necessity of covering auto dealers. NADA argues that auto-related complaints were just 1 percent of all FTC complaints last year, and that all states regulate auto finance. On the other side, a coalition of consumer and other advocacy groups (including Consumer Watchdog, Consumers Union, the California Public Interest Group, the NAACP) contends:

While the vehicles themselves have never been better, auto sales and financing practices have never been worse. In fact, year after year, auto sales and service complaints, typically related to predatory lending practices at dealerships, rank number 1 among consumer complaints lodged with state and local consumer protection agencies

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9 Comments on “Car Dealers Exempted From Consumer Financial Protection Act...”


  • avatar

    No, they isn’t getting too heavy.

  • avatar
    texlovera

    I had the same reaction: WTF is with the grammar in that ad?? Just a typo, or are they trying to “speak black”??? Either way, it’s insulting.

  • avatar
    chuckR

    Car dealers are small enough to fail. This has been amply proven by the government’s actions over the past several months. The dealers are at worst small time grifters, unlike the larger financial institutions.

    I may not like them all that much, but the observations are correct that a) dealers didn’t have anything to do with the credit crisis (any more than the rest of us, that is) and b) this is needless oversight of companies individually too small to matter. Let the states regulate them – don’t give me any static about that old ho’ the Interstate Commerce Clause. Even if you think that some state oversight bureaucracies don’t do a good job, that doesn’t begin to suggest that Fed ‘crats would.

  • avatar
    windswords

    “Campbell did recuse himself in the vote on an auto industry bailout, because he said money would go directly to General Motors, a firm he has done business with for years.”

    Damn, could you imagine a democrat recusing himself from a vote? How would Harry Reid exempt his own state from Medicare cuts?

  • avatar
    Steven02

    How exactly do dealers cause this credit crisis? You don’t have to finance through the dealer. You don’t have to buy the car for that dealer. You can pay cash. You can negotiate. You can walk away. Why the need for gov’t involvement here?

    Educated consumers don’t have this problem. Uneducated consumers… nothing will fix that.

  • avatar
    Mr Carpenter

    You’re right, Steven02. As a pal of mine always says “You can’t fix stupid.”

  • avatar
    criminalenterprise

    Uneducated consumers bought cars they couldn’t afford with financing through dealerships who didn’t care whether or not they could afford the purchase or the payments.

    The dealerships got a financial company to write the note, and that company securitized the note along with a bunch of others and sold them in pieces to other financial companies who were originating, securitizing and selling off their own junk loan portfolios as well.

    And they called it diversification.

    Now, apply the above problem to houses, where you can add a zero to the problem, and you end up with widespread financial collapse.

    Uneducated consumers should be protected from predatory and deleterious underwriting standards or we all suffer. The powerful and intelligent do not have license to exploit or abuse the weak and stupid.

  • avatar
    Via Nocturna

    Perhaps the House should instead incorporate a provision into the bill that requires any car dealer wishing to avoid gov’t oversight of its lending practices to enroll all its employees in a remedial English class. Ugh. “‘Is’ your auto ‘notes’ getting too ‘heavy’”.

  • avatar
    John Horner

    “Rep John Campbell (R-CA) not introduced an amendment [PDF] exempting them …. ”

    Once again a Republican waters down a consumer protection bill. But one must wonder, how many house Republicans will actually vote for the bill once it gets to the floor vote?


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