houserefinancecenter.com Blog

New Financial Reform Car Dealers Exempt

July 23rd, 2010

Automobile dealerships can breathe easy. The new financial reform bill does not apply to car dealerships. On July 21, 2010 President Obama signed the new Financial Reform Bill.

There was some serious money spent on lobbying to get this decision. In 2009 and for the first quarter of 2010 the National Automobile Dealers Association and the American International Automobile Dealers Association spent $3.5 million in lobbying.

The dealers position is that they are not lenders. They do not underwrite loans. They do not fund or service loans. They simple push paperwork. Therefore they are entitled to the exemption.

An automobile is the second largest financial obligation many families are faced with. Some households have two or more automobiles. It is therefore important that this industry be regulated like the banks, like the credit card companies and like the payday loans companies.

This is an industry that has its tales of fraud, forgery and ripoffs. In many cases the victims are the elderly and the visible minorities.

In 2001, AutoNation, one of the largest dealer networks in the nation, agreed to pay more than $2 million to settle a Los Angeles District Attorney’s Office investigation and a California Department of Motor Vehicles lawsuit accusing its El Monte, Calif., Chevrolet outpost of subjecting more than 1,500 customers to what the DMV described as “fraud, deceit and misrepresentation” in the sale and leasing of new and used vehicles.

The auto sales and financing industries are dominated not by main street operations, but by large corporate entities that couldn’t prosper without the financial backing provided by Wall Street banks and investors. Many auto dealers are intimately linked with Wall Street through the auto loan-backed securities market. Wall Street funds more than 70 percent of auto dealer loans, according to a report by the Cambridge Winter Center for Financial Institutions Policy.

Consumer groups counter that the auto sales and financing industries are dominated not by mom-and-pop shops, but by large corporate players that couldn’t thrive without the financial liquidity provided by Wall Street banks and investors.

Many auto dealers are intimately linked with Wall Street through the auto loan-backed securities market. Wall Street funds more than 70 percent of auto dealer loans, according to a report by the Cambridge Winter Center for Financial Institutions Policy.

For now, the automobile dealers have dodged the bullet. The smart ones will know that they are being watched very carefully. This should be incentive enough for them to fly straight.

Notes to this articles. Readers should visit the website:

http://www.publicintegrity.org

Related articles by Zemanta

• Financial Overhaul Misses Auto Dealers (nytimes.com)
• NADA: Financial Reform Law Protects Consumers and Keeps Auto Financing Affordable, Accessible (eon.businesswire.com)
• Auto dealers seek to avoid federal oversight (sfgate.com)

Entry Filed under: Financial Reform