NADA was unhappy that Wall Street reform legislation would “unfairly increase federal regulation over dealerships."
President Obama suffered a political defeat late last week from members of the National Automobile Dealers Association, who successfully had themselves excluded from the financial regulations that are proposed to stop the reckless practices of Wall Street that caused the ongoing Great Recession.
Dealers who provide their own funds for loans would have been treated just like banks, credit unions and other auto lenders under the bill.
NADA was unhappy that what started as Wall Street reform legislation would “unfairly increase federal regulation over dealerships and potentially eliminate dealer-assisted financing.” (See NADA Fighting Wall Street Financial Reform )
The White House, Pentagon, the Department of Treasury and other consumer interest groups fought strongly to regulate auto dealers.
Among other things, the bill would create a new Bureau of Consumer Financial Protection, and curb abusive practices such as ‘bait and switch” where one interest rate or down payment is advertised, but much higher ones substituted.
There are also rules governing other questionable ploys, such as the failure to pay off liens on trade-in vehicles, or conditional loan agreements. These are all reasonable propositions say consumer advocates.
However, the largely Republican members of the National Automobile Dealers Association, who have spent more than $3 million lobbying in “pay to play” Washington since last year, successfully defended their interests.
House and Senate conference committee negotiators voted last Friday to exclude auto dealers from the overhaul of the nation’s financial system by adopting the so-called Brownback-Campbell language.
In late 2009, House Financial Services Committee member John Campbell, R-CA proposed an amendment to exclude dealer-assisted financing. After the Campbell amendment passed the House, Senator Sam Brownback, R-KS, took up the cause. Local efforts by dealers and dealership employees resulted in a 60-30 vote urging Senate conferees to accept the House language to exclude dealerships from the proposed agency.
As a concession to secure the dealer exclusion, the Federal Trade Commission, which already oversees dealer-assisted financing, was granted expedited rule-writing authority over unfair or deceptive practices. It is unclear if the FTC is willing or able to stop financial abuse by auto dealers.
With the death of Senator Robert Byrd, D-WV, early this morning, the future of the financial reform legislation itself also remains in doubt. Democrats will need another vote for the bill if it comes to the floor this week, unless they can convince other politicians, including some Democrats, to change their opposing positions.
The Administration wanted financial reform passed before the Fourth of July holiday. Now, it may delay a vote until Byrd’s successor is appointed.