Later this afternoon, the Senate will vote on a motion to instruct conferees on the Brownback Amendment. That basically means members of the Senate will cast a nonbinding vote on whether or not they think the House and Senate conferees should consider carving out a loophole for auto dealers that make auto loans from the financial reform bill.
The President has been clear on this issue, repeatedly urging members of the Senate to fight efforts of the special interests and their lobbyists to weaken consumer protections. The fact is, auto dealer-lending is an $850 billion industry, which is larger than the entire credit card industry and they make nearly 80 percent of the automobile loans in our country.
Is there any question that these lenders should be subject to the same standards as any local or community bank that provides loans?
Auto dealer-lenders sell auto loans to working families every single day, and while most dealers are no doubt above board, some cannot resist the bigger profits that come from inflating rates, hiding fees, and tacking on over-priced add-ons.
These profits can lead some dealers to treat their customers unfairly. There are countless stories of hard-working people who are never even contacted when they are hit with a higher interest rate or who are forced to swallow the cost already paid toward the purchase of their car while giving up the vehicle.
People like Lacie Riso and Jarred Whited, a sailor on the aircraft carrier USS Ronald Reagan, as NPR reported:
Riso, 18, and Whited, 20, an aviation ordnance man, needed a car because their old one was breaking down. They went to a dealer near their base in San Diego and found a used Hyundai Sonata they liked. Then, Riso says, the salesman contacted a finance company.
"And they say, you know, 'We'll approve them. They need to pay $394 a month.' So we are like, you know, we can do that; that's fine," she says.
Riso and Whited got the keys. They left Riso's old Ford Focus as a trade-in. The next day, they went back to the dealer to set up an automatic payment to the finance company from Whited's military paycheck.
But after several weeks, the finance company said the loan wasn't approved after all. The couple then asked the dealer for new payment information.
"So we say, you know, 'What bank do we pay this to? What's the account number? What's the loan number that you have?' And he told us, 'No, I don't have anything like that. You can pay me cash or personal check to me at the dealership.'"
Riso and Whited turned that offer down and the dealer repossessed the Sonata. They told him to give back the more than $500 they had made in payments, along with Riso's Focus.
"And he said, 'Oh no, you're never going to see your Focus again. Your car was repossessed for nonpayment and you can pay me $800 to get back in this contract,' " Riso says.
In a letter to the Treasury Department last February, Clifford Stanley, the Undersecretary of Defense also raised concerns about the impact the “unscrupulous practices” of auto dealer-lenders on military families. Army Secretary John McHugh recently sent a letter to Senate Banking Committee Chairman Christopher Dodd, D-Conn., “voicing his objection to Brownback's amendment." As that same story notes, "Holly Petraeus, wife of U.S. Central Command chief Gen. David Petraeus, also joined the fight. As director of the Council of Better Business Bureau's Military Line Program, she reiterated assertions that many service members are in financial trouble with their auto payments, locked into loans with interest rates of 15 percent or higher.”
The dealer-lenders who engage in such deceptive behavior are struggling to hold on to the unfair advantage that they have over hardworking Americans and responsible dealer-lenders. According to recent news reports, lobbyists and allies of Wall Street are not letting up and they plan to throw millions of dollars toward efforts to weaken provisions including an auto dealer carve out in the bill as it moves to conference.
While the Senate passage last week was a significant step forward for the bill, the President will not rest as attempts are made to weaken the bill.
Jen Psaki is Deputy Communications Director