Car Dealers Afraid of New Federal Regulator
The Senate is debating financial reform bill and the car dealers want no part of it. The proposal, backed by the Obama administration, provides for a new consumer protection agency that would have jurisdiction over banks and other lenders. The car dealers, who arrange financing on most car purchases, are lenders.
Republican Sen Brownback has an amendment to exempt the car dealers. In opposing the amendment, consumer advocates point out that car dealers often take advantage of consumers in setting the terms of leases and purchases. Dealers, for example, sell cars only to later demand an additional down payment to complete the deal.
The Pentagon supports the bill because low-income military people are often victimized by shady car dealers that set up shop just outside many bases.
A Pentagon study revealed cases of “ ‘bait and switch’ financing, falsification of loan applications or other documents, failure to pay off liens on trade-in vehicles, ‘packing’ loans with items whose price tag bears little or no relationship to their actual cost or value, and discriminatory lending.”
The NY Times article on the bill featured the case of Matthew Garcia, a 25-year-old Army specialist stationed at Fort Hood in Texas, who agreed to a deal in which he would pay 19.9 percent interest on a $12,000 loan and signed what he believed was a binding contract. He drove off. But several days later the salesman summoned him back to the lot, Mr. Garcia said, to tell him the financing had fallen through. He had signed only a conditional contract, he was told. If he wanted to keep the car, he would need to put up an additional $2,500 in cash. Mr. Garcia refused, but by that time someone had blocked his car so he could not leave. He said the dealership would not return his $1,500 down payment. “I was tricked, manipulated and lied to,” said Mr. Garcia, who earns about $20,000 a year. “And I feel like it was intentional.”
http://www.nytimes.com/2010/05/12/business/12dealers.html?hpw
