Pentagon Backs Dealer Finance Regulation,
Remember when we reported that the cash cow known as in-house dealer finance wouldn’t be covered by the Consumer Financial Protection Act, currently making its way through congressional committees? That version of the bill passed the House Financial Services Committee (with some questionable support), but now Automotive News [sub] reports that the Senate Banking Committee has passed its own version which does make dealer finance subject to regulation by the Consumer Financial Protection Bureau. The Senate version would also make the CFPB an office of the Federal Reserve, rather than a stand-alone agency. So, should an agency set up to prevent another financial crisis extend regulation to dealer finance operations? Dealers aren’t happy about the idea, but traditional consumer advocates aren’t the only ones saying yes…
Undersecretary of defense for personnel and readiness Clifford Stanley is one of the most surprising advocates for tough consumer protection oversight, even going as far as to single out auto sales as a trouble area. In a letter to the Treasury [via ABC News] he wrote:
The Department of Defense would welcome and encourage CFPA protections provided to service members and their families with regard to unscrupulous automobile sales and financing practices, provided such protections would not limit access to legitimate products… there are still documented cases of service members falling victim to predatory practices and prohibitively expensive products… We believe the intervention of the CFPA in overseeing auto financing and sales for service members will help protect them and will assist us in reducing the concerns they have over their financial well-beingHow often do you see the Pentagon falling into step with folks like Consumers for Auto Reliability and Safety and Will Ferrell? Meanwhile, the National Association of Auto Dealers tells AN [sub] that it’s talking with senators about introducing an amendment similar to the one that stripped dealer finance from the House version of the bill. NADA lobbyist Bailey Wood explains:Dealers weren’t the cause of the mortgage meltdown. In fact, dealers still have problems with access to credit and are as much a victim of what happened as the average consumerAnd while the ongoing dealer drama in the wake of the GM and Chrysler bankruptcy-bailouts proves that the downturn hasn’t been kind to dealers, the military would not be wading into this issue if it didn’t have a reason. A Pentagon survey of 659 Defense Department personal finance counselors revealed that 72 percent said they had counseled troops issues like “bait-and-switch” financing, loan application falsification and tacked-on charges in the last six months. And as Stanley put it “[the] personal financial readiness of our troops and families equates to mission readiness.”
Rick Korallus on Mar 24, 2010
CyCarConsulting +1. When we inform/educate people about the hole they are digging for themselves and they continue to beg for extended terms beyond 60 months because they "gotta have it", are we supposed to turn them away so our competitors can sell them what they want? Those same people with the 3 year old trade in can't be bothered with leasing either because "they own their cars". Mmm, yeah right! 3% mark up on finance is extremely difficult to obtain anymore with all the special rates and competition from credit unions out there. Based on a Reader's Digest article that came out a long time ago, I tell people all the time, it's cheaper to keep and maintain a car for 10 years than it is to trade every 3, 4 or even 5 years. The RD article pointed out that after 30 years, based on then average car prices and interest rates, people are squandering a quarter million dollars on interest and that included mechanical break downs too. How come no one is complaining how much the banks make on those extended loans? Why are the banks allowed to even offer them? It's no different than making A.R.M.s available to people who had no business getting them in the first place. And if the government is so interested in our financial well being, why does one have to wait until they're 21 to start contributing to a 401k? Why are we limited from putting away as much money towards retirement as we possibly can?
Asapuntz on Mar 24, 2010
> How often do you see the Pentagon falling into step with folks like Consumers for ... Pretty sure that there are payday loan restrictions when dealing with service personnel. In general, there is at least some attempt to protect military personnel from "debt traps". In part because we don't want them beholden to external influence, but also because their duties can make it difficult for them to make payments, etc.
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