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Obama: More oversight needed for auto dealers

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Obama: More oversight needed for auto dealers

BY JUSTIN HYDE

FREE PRESS WASHINGTON STAFF

WASHINGTON -- President Barack Obama today warned that exempting auto dealers from a new consumer protection agency would hurt buyers and let dealers continue "deceptive practices."

The nation's 20,000 new-car dealers have blitzed Capitol Hill over the past two weeks seeking to be cut free from the agency that would oversee consumer lending, part of a package of financial reforms expected to move through the Senate over the next several days. They're backing an amendment by Sen. Sam Brownback, R-Kan., that would exempt auto dealers' lending from new oversight that would still apply to banks and finance companies like Ally Bank, the former GMAC.

In his statement, Obama said leaving dealers out of the bill would let them "inflate rates, insert hidden fees into the fine print of paperwork, and include expensive add-ons that catch purchasers by surprise.

"This amendment guts provisions that empower consumers with clear information that allows them to make the financial decisions that work best for them and simply encourages misleading sales tactics that hurt American consumers," Obama said.

Dealers have maintained that their finance businesses were already covered by federal and state regulators, and did not deserve new regulations meant to crack down on abuses by Wall Street banks that led to the 2008 credit crisis which spurred a global recession. They also have warned that the bureau would inevitably limit credit to consumers.

Bailey Wood, a spokesman for the National Automobile Dealers Association, said the new rules would hurt loans to less-creditworthy customers, either forcing them to pay higher rates or not get financing at all.

“Auto loans and leases are more affordable for consumers because dealers force lenders to compete for our customer’s business," he said. "Adding burdensome and expensive regulations on Main Street auto dealers will only make it harder and more costly for a family to buy a car.”

The financial reform bill that passed the House last year excluded auto dealers after a similar lobbying push.

But a growing coalition of consumer advocates, community banks and the Defense Department has pushed back in recent days against the auto dealers' efforts, saying dealers who craft loans for consumers should face the same kind of oversight that mortgage brokers, who make similar offers.

"If I’m a customer, I ought to have the same level of consumer protection at a loan office from an auto dealer as I have at a loan office in a bank," said Steve Verdier, director of congressional affairs for the Independent Community Bankers of America.

U.S. Sens. Dick Durbin, D-Ill., and Jack Reed, D-R.I., said today that keeping dealers covered by the proposed Consumer Financial Protection Bureau was an essential part of cracking down on abusive lending practices.

"It makes no sense that we would exempt auto deals from common-sense recommendations," Durbin said.

Obama and Senate Democrats have been bolstered by the Defense Department, which has said unscrupulous auto dealers often target service members as easy targets for expensive loans.

While a vote on the amendment was expected sometime this week, it could be delayed into next week.

link:

http://www.freep.com/apps/pbcs.dll/article?AID=/20100512/BUSINESS01/100512042/1210/Obama-Dont-exempt-auto-dealers&template=fullarticle

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There's a world of financial difference between a mortgage loan & a car loan.

Frankly, the level of red tape ALEADY in place is daunting enough WRT a car financing.

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They also have warned that the bureau would inevitably limit credit to consumers.

Oh yes... because any time the government says you can't screw a customer a certain way, it will limit the amount of loans you can make available.

There's a world of financial difference between a mortgage loan & a car loan.

From a financial mechanics standpoint, not really. They still get packaged up and sold.

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>>"From a financial mechanics standpoint, not really. They still get packaged up and sold."<<

My point was that a car loan involves a relative miniscule amount of interest vs. a mortgage via the way they are calculated/structured. That's the 'financial mechanics' I was thinking of.

Not that anyone should get ripped off in either situation.

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