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Obama firm on dealer oversight

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Obama firm on dealer oversight

He says exemption 'guts' safeguards in financial overhaul

David Shepardson / Detroit News Washington Bureau

Washington -- The White House stepped up its efforts to prevent auto dealers from being exempted from oversight by a new consumer watchdog agency.

Sen. Sam Brownback, R-Kan., has introduced an amendment to exempt the dealers from the proposed Consumer Financial Protection Agency -- part of a massive overhaul of the nation's financial system.

President Barack Obama said in a statement Wednesday the Brownback proposal would undermine "strong consumer protections with a special loophole for auto dealer-lenders."

He argued that exempting auto dealers "would allow them to inflate rates, insert hidden fees into the fine print of paperwork, and include expensive add-ons that catch purchasers by surprise." An exemption, the president said, "guts provisions that empower consumers with clear information that allows them to make the financial decisions that work best for them."

Auto dealers fighting efforts to include them under the new agency argue that they aren't responsible for the woes that a massive financial reform bill seeks to address.

The U.S. House exempted dealers from oversight when it approved a similar measure in December.

Ed Tonkin, chairman of the National Automobile Dealers Association, issued a response to Obama's statement saying: "Sadly, the White House is continuing to issue misleading statements in its efforts to get auto dealers wrongly included in Wall Street reform legislation. Much of what's included in its latest statement is pure fiction."

Michael Barr, an assistant Treasury secretary, said in a White House blog post that the dealers' efforts were "particularly egregious."

"For the sake of responsible consumers -- as well as for responsible community banks and credit unions -- we must ensure that all businesses that are significantly engaged in providing consumer financial products and services play by the same basic rules of the road," Barr wrote.

The Brownback amendment will possibly be voted on today.

Earlier Wednesday, two Democratic senators and the wife of Gen. David Petraeus urged Congress to reject a dealer exemption.

The No. 2 Democrat in the Senate, Richard Durbin, D-Ill., along with Sen. Jack Reed, D-R.I., and Holly Petraeus, the wife of the head of U.S. Central Command, said young soldiers, sailors and airmen are often preyed upon by unethical auto dealers.

The bill "really tries to eliminate some of the misleading language, some of the tricks and the traps that lenders use many times in luring people into loans that are difficult to understand and impossible to pay," Durbin said in a conference call with reporters.

"Abusive financial practices by auto dealers are the number one source of complaints received by the Better Business Bureau and state and local agencies. If they are the number source of the problem, why would we ever exempt them from this type of consumer financial protection?"

Reed rejected the argument advanced by auto dealers that the agency could limit access to auto lending by raising costs. "The record is pretty clear that there is a lot of activity by auto dealers around military bases that is shameful."

Durbin said ethical dealers "have nothing to fear -- in fact, they are going to benefit by driving out some of the people who are predatory lenders taking advantage of borrowers."

Holly Petraeus, who directs a Better Business Bureau program for military families, said auto lending needs oversight.

"It's a fact that military personnel love their cars," she said. "Sadly, many of them end up paying far more for those cars than they should."

She noted that many are locked into very high interest rates and "and many are inexperienced. They don't recognize a bad deal when they see it."

From The Detroit News: http://detnews.com/article/20100513/AUTO01/5130373/1148/auto01/Obama-firm-on-dealer-oversight#ixzz0noVKGTzU

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