Financial reform will exempt loan-making car dealers
TEXT OF STORY
Bill Radke: After working through the night, members of Congress are putting the finishing touches on sweeping financial reforms. Lawmakers have watered down a plan that would have kept banks from trading many types of derivatives. They’ve limited how much banks can invest in private equity and hedge funds. And it looks like they’ll exempt car dealers from oversight by the new Consumer Protection bureau. That’s a controversial move, as Marketplace’s Alisa Roth reports.
ALISA ROTH: Car dealers say they should be exempt from the new rules because they’re not lenders.
Bailey Wood is with the National Automobile Dealers Assocation. He says dealers are really just doing paperwork.
Bailey Wood: Dealers are simply connecting a consumer with a bank. Dealers neither fund nor service nor underwrite loans.
What he’s saying is true: Dealers are just like retailers the same way a store buys bubble gum from a wholesaler and sells it to you at a markup. The dealers “buy” the car loans wholesale and sell them at retail.
Kathleen Day is spokesman for the Center for Responsible Lending. It’s a nonprofit policy group focused on financial services. She says the problem is in what dealers add in the markup.
Kathleen Day: Lots of fees are added, higher interest rates than are fair, rates change, there’s lack of transparency, it’s really hard to understand the true cost. The list goes on and on and on.
She says having different standards for the same product ends up being a race to the bottom. Congress is expected to vote on the financial reform bill next week.
I’m Alisa Roth for Marketplace.
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