WASHINGTON — A pair of Senate Democrats is continuing to fight for auto dealers to be policed by a proposed consumer watchdog agency.
"Abusive financial practices by auto dealers are the No. 1 source of complaints received by Better Business Bureaus and state and local agencies," Sen. Richard Durbin, D-Ill., said on a conference call with reporters Wednesday. "If they are the No. 1 problem, why would we ever exempt them?"
Sen. Sam Brownback, R-Kan., has been pushing an amendment that would exclude auto dealers from oversight by the proposed Consumer Financial Protection Agency, a piece of the financial sector regulatory overhaul effort coming together on Capitol Hill. A vote on that amendment could come as early as Wednesday.
President Barack Obama said the amendment undermines consumer protection. "The fact is, auto dealer-lenders make nearly 80% of the automobile loans in our country, and these lenders should be subject to the same standards as any local or community bank that provides loans," he said in a statement Wednesday.
The military has been pushing hard for dealers to be covered by the agency while dealers have been lobbying senators to exclude them from its oversight.
Groups representing military personnel have argued that military members are often targets for predatory lenders because of their guaranteed paychecks.
Soldiers, sailors, airmen and marines often get stuck paying far more than they should for things like auto loans, said Holly Petraeus, director of the Better Business Bureau's Military Line program and the wife of Gen. David Petraeus, who heads U.S. Central Command. She cited the case of a young sailor buying a $4,000 Jeep at 14% interest. At the end of his five-year loan, he would have paid $16,000 for the Jeep, she said.
Associations representing community bankers and credit unions have sided with the military, a move the National Automobile Dealers Association said is aimed at limiting competition.
"Local banks and credit unions are simply trying to cut out their competition so they can corner the market on auto loans," said David Regan, the association's vice president of legislative affairs.
Auto dealers have said coming under the watch of a consumer protection agency could increase costs and cut the availability of auto loans.
Sen. Jack Reed, D-R.I., said in the conference call he doesn't buy the argument. "I don't think financing loans is based on the gullibility of the consumer but on the ability of the consumer to pay," he said.
