Car Dealers Protected From New Consumer Protection Agency

Thanks to fierce lobbying, car dealers won’t be regulated by a new consumer protection agency.

Photo: Wikimedia Commons

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


This story first appeared on the ProPublica website.

Last week, the House Financial Services Committee voted to establish a new Consumer Financial Protection Agency. The agency would have broad authority—but thanks to fierce lobbying, it’ll also have big gaps. Consumer advocates point to an exemption for auto dealers as one that’s particularly worrisome.

An amendment stripped auto dealers from the proposed agency’s oversight. With strong backing by the powerful dealer lobby, and despite the White House’s attempts to kill it, the amendment easily passed in the committee, 47-21. Nearly half of the panel’s Democrats voted for the amendment along with the committee’s Republicans, who’ve generally opposed the new agency.

The exception for auto dealers sets up an odd situation: Many of the larger financial institutions that provide auto loans will be under the new agency’s supervision, but that supervision would stop at the dealer’s door. That’s more than a technicality, consumer advocates say, because some dealers exploit their role as the middleman between the consumer and the loan.

Those dealers tack on unnecessary fees and steer customers into higher-cost loans, splitting the difference with lenders. “The buying process itself is intentionally structured to be needlessly complicated and time-consuming to wear down and confuse car buyers,” said John Van Alst of the National Consumer Law Center.

About half of auto buyers finance their purchases through their dealers, but that proportion is even higher for families with lower incomes, said Van Alst, and minorities are particularly at risk. In a letter to the committee’s leadership this month, the Consumers Union, the NAACP, the National Consumer Law Center and more than 30 other groups argued against the exemption, pointing to a pattern of abuses.

Steve Adamske, spokesman for the committee chairman, Barney Frank, who voted against giving dealers an exemption, said that Frank shared those concerns, but he also “understood the political forces behind the amendment. He wants consumer advocates to go to work and change the votes.”

The National Automobile Dealers Association—which contributed $2.86 million to members of Congress during the 2008 election cycle—has argued that current regulation of dealers is adequate. David  Westcott of NADA went further in a statement praising the amendment, saying that adding  regulation for dealers was unfair, because they “had absolutely nothing to do with the credit crisis.”

But the purpose of the new agency goes beyond just targeting those most responsible for the country’s financial collapse, said Travis Plunkett of the Consumer Federation of America. “The goal of this agency is to protect consumers. And that means looking at abusive lending of all kinds.”

It seems that consumer advocates have an uphill battle. Beyond their substantial financial contributions, dealers are often prominent constituents in members’ districts. The dealer lobby last showed its influence  after General Motors and Chrysler closed thousands of dealerships as part of their bankruptcies. Lawmakers lobbied the administration about the move, and the House even passed a measure to force the automakers to reopen the dealerships. The push eventually wilted because of continued opposition from the White House, which argued that the car companies wouldn’t survive without the closings.

WE'LL BE BLUNT

It is astonishingly hard keeping a newsroom afloat these days, and we need to raise $253,000 in online donations quickly, by October 7.

The short of it: Last year, we had to cut $1 million from our budget so we could have any chance of breaking even by the time our fiscal year ended in June. And despite a huge rally from so many of you leading up to the deadline, we still came up a bit short on the whole. We can’t let that happen again. We have no wiggle room to begin with, and now we have a hole to dig out of.

Readers also told us to just give it to you straight when we need to ask for your support, and seeing how matter-of-factly explaining our inner workings, our challenges and finances, can bring more of you in has been a real silver lining. So our online membership lead, Brian, lays it all out for you in his personal, insider account (that literally puts his skin in the game!) of how urgent things are right now.

The upshot: Being able to rally $253,000 in donations over these next few weeks is vitally important simply because it is the number that keeps us right on track, helping make sure we don't end up with a bigger gap than can be filled again, helping us avoid any significant (and knowable) cash-flow crunches for now. We used to be more nonchalant about coming up short this time of year, thinking we can make it by the time June rolls around. Not anymore.

Because the in-depth journalism on underreported beats and unique perspectives on the daily news you turn to Mother Jones for is only possible because readers fund us. Corporations and powerful people with deep pockets will never sustain the type of journalism we exist to do. The only investors who won’t let independent, investigative journalism down are the people who actually care about its future—you.

And we need readers to show up for us big time—again.

Getting just 10 percent of the people who care enough about our work to be reading this blurb to part with a few bucks would be utterly transformative for us, and that's very much what we need to keep charging hard in this financially uncertain, high-stakes year.

If you can right now, please support the journalism you get from Mother Jones with a donation at whatever amount works for you. And please do it now, before you move on to whatever you're about to do next and think maybe you'll get to it later, because every gift matters and we really need to see a strong response if we're going to raise the $253,000 we need in less than three weeks.

payment methods

WE'LL BE BLUNT

It is astonishingly hard keeping a newsroom afloat these days, and we need to raise $253,000 in online donations quickly, by October 7.

The short of it: Last year, we had to cut $1 million from our budget so we could have any chance of breaking even by the time our fiscal year ended in June. And despite a huge rally from so many of you leading up to the deadline, we still came up a bit short on the whole. We can’t let that happen again. We have no wiggle room to begin with, and now we have a hole to dig out of.

Readers also told us to just give it to you straight when we need to ask for your support, and seeing how matter-of-factly explaining our inner workings, our challenges and finances, can bring more of you in has been a real silver lining. So our online membership lead, Brian, lays it all out for you in his personal, insider account (that literally puts his skin in the game!) of how urgent things are right now.

The upshot: Being able to rally $253,000 in donations over these next few weeks is vitally important simply because it is the number that keeps us right on track, helping make sure we don't end up with a bigger gap than can be filled again, helping us avoid any significant (and knowable) cash-flow crunches for now. We used to be more nonchalant about coming up short this time of year, thinking we can make it by the time June rolls around. Not anymore.

Because the in-depth journalism on underreported beats and unique perspectives on the daily news you turn to Mother Jones for is only possible because readers fund us. Corporations and powerful people with deep pockets will never sustain the type of journalism we exist to do. The only investors who won’t let independent, investigative journalism down are the people who actually care about its future—you.

And we need readers to show up for us big time—again.

Getting just 10 percent of the people who care enough about our work to be reading this blurb to part with a few bucks would be utterly transformative for us, and that's very much what we need to keep charging hard in this financially uncertain, high-stakes year.

If you can right now, please support the journalism you get from Mother Jones with a donation at whatever amount works for you. And please do it now, before you move on to whatever you're about to do next and think maybe you'll get to it later, because every gift matters and we really need to see a strong response if we're going to raise the $253,000 we need in less than three weeks.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate