by Janet Hook and Jim Puzzanghera
The debate over the Senate's financial reform bill is setting up an unusual battle on Capitol Hill between two powerful groups: automobile dealers and the military.
Car dealers, a well-organized small-business lobby with members in nearly every legislative district, have swarmed the Senate in recent weeks clamoring to be exempt from the legislation's proposed protections against loan scams.
They say the tough new government oversight should focus on the big Wall Street firms that caused the financial crisis, not auto dealers struggling to recover from it.
"There's a lot of dealers that are still on the brink, and taking their finance revenue away from them could be the straw that breaks the camel's back," said John Symes, who owns three auto dealerships in Pasadena.
But in a letter released Thursday, a top Pentagon official said soldiers need to be protected from "unprincipled auto lending" so they can concentrate on their primary mission: "protecting our great nation."
"Soldiers who are distracted by financial issues at home are not fully focused on fighting the enemy, thereby decreasing mission readiness," Army Secretary John M. McHugh wrote Wednesday to Senate Banking Committee Chairman Christopher Dodd (D-Conn.).
Top Pentagon officials don't usually weigh in on non-military legislation. But they have complained that shady car loans have been particularly harmful to military personnel -- often young, inexperienced consumers who have other worries when they walk into car lots near military bases.
For military and civilian families, the battle could have major consequences on the terms of car loans, which often are the largest debt they hold after home mortgages.
The lobbying by the Pentagon, along with strong opposition to the exemption by President Obama, highlighted the contentious fight over the proposed consumer financial protection agency, a central and controversial component of the sweeping financial regulatory overhaul legislation.
"We simply cannot let lobbyist-inspired loopholes and special carve-outs weaken real reform that will empower American families," Obama said this week.
Standing up for consumers and members of the armed forces would seem to be a no-brainer for senators. But auto dealers are a popular home-state constituency -- well-known small-business owners in many communities who sponsor Little League teams and employ constituents.
Sen. Sam Brownback (R-Kan.) has taken up their cause. He wants to amend the legislation to exempt auto dealers from the consumer agency's oversight if they are acting only as third parties in arranging financing for consumers through banks or credit unions.
"Auto dealers are a part of Main Street, not Wall Street, and they are not responsible for the financial meltdown," Brownback said.
Most dealers are simply intermediaries in auto financing and don't want to be subject to burdensome new regulatory oversight, said Bailey Wood, a spokesman for the National Automobile Dealers Assn.
Terms of all auto loans would be covered by the new consumer agency regardless, because most loans are made by banks and credit unions that would be under its oversight. The proposed exemption makes it clear that auto dealers that provide direct financing, as some do, also would be covered.
"We're just in the middle, facilitating the loan," said Symes.
At his dealerships -- Symes Cadillac Saab, Toyota Pasadena and Land Rover Pasadena -- oversight by the new agency would mean more forms to fill out and additional training for employees.
"Like with all government regulation, the price to the consumer is going to go up," he said.
With bipartisan support, the House included a similar exemption in its version of the financial regulatory overhaul last year. But that was before the military began weighing in.
In a February letter supporting the stricter car dealer oversight, Undersecretary of Defense Clifford L. Stanley said that 72% of the Pentagon's financial counselors reported helping service members with problem car loans.
Surveys of service members found that financial matters are the second-leading source of stress -- even more than concerns about deployments -- and that car loans represented the most significant financial responsibility of most young recruits, Stanley said.
Sen. Jack Reed (D-R.I.) told senators this week about Army Spc. Jennifer Howard of Fort Riley, Kan., who was charged for a moon roof and alloy wheels on her car that she never got.
"The dealership knows that we're busy, we're tired. We don't take the time, because we don't have a lot of time," Reed quoted her as saying in support of more consumer protections. "That is no way to treat soldiers. It is no way to treat consumers."
The cause has been taken up by Holly Petraeus, the wife of Gen. David Petraeus, head of the U.S. Central Command. She has been working with a special program of the Better Business Bureau to establish stricter consumer protections for military families.
"It's a fact that military personnel love their cars," Holly Petraeus said in a conference call with reporters this week. "Sadly, many of them end up paying far more for them than they should."
Consumer advocates also oppose the auto dealer exemption.
Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a Sacramento nonprofit advocacy group, said auto dealers pack financing contracts with costly items such as extended warranties and insurance to cover loan payments if the vehicle is wrecked.
"Even very sophisticated consumers get ripped off," she said.
According to the Better Business Bureau, new car dealers ranked fifth in complaints in 2009, and used car dealers ranked seventh.
"Why should we exempt from scrutiny the very businesses that generate the most problems?" Sen. Dick Durbin (D-Ill.) said.
Comments
Does any sane person think the US government--which as handed out billions in bad loans over the past year, and has borrowed far more than it's capable of repaying--is capable of regulating private loans for the better?
Only when the federal government can show that it's own financial house is in order, should it consider regulating the loans of the rest of us.
Posted by: Equal time | May 14, 2010 8:58 AM
Countdown to "HHH" filling 90% of the thread with bumper sticker slogans and hate messages while using different post names that never fool anybody, in 5...4...3...2...1... ding, ding, ding
Posted by: John E | May 14, 2010 9:23 AM
That's why GMAC is now, Ally Bank. They were doing such a great job, they had to get rid of their old, affiliated name !! Get real, about reform and quit the obstructionism, Republican-Libertarian-T.Baggers !!
SUPPORT OUR TROOPS, BRING THEM HOME, ALIVE AND WHOLE. NOW.
Posted by: Don Fitzgerald, IL | May 14, 2010 9:39 AM
What do you call someone that is crooked as the day is long? Someone that will scam you when they can, and will look you straight in the eye and lie to your face?
Answer:
A used-car salesman.
Yep, I think there should be some oversite. Also, when I hear them claiming that "this will cost the consumer more" then I know there is a problem that needs looked at.
Posted by: Xcellentform | May 14, 2010 2:36 PM
You can't take loan scams away from car dealers, you'll take away their livelihood. This is America damnit!
Posted by: Quippy | May 14, 2010 6:08 PM
Horrible Form,
I thought the answer was politican
Posted by: Terry | May 14, 2010 7:11 PM
Most dealers are simply intermediaries in auto financing and don't want to be subject to burdensome new regulatory oversight, said Bailey Wood, a spokesman for the National Automobile Dealers Assn....
"We're just in the middle, facilitating the loan," said Symes.
--------------------
They are only trying to help you slip into that automotive dream ~ Papa Hobo Blues, Rhymin' Simon, circa 1979. Apparently, however, in the year 2010, this, equates to a crime.
As we would say in Amerika’s favorite Red State:
“If you are in business, but not in politics, you are not in business”
These Leftists democrats will absolutely destroy you, if you think that you can survive simply by trying to operate a business. Leftist democrats will run you OUT of business. It’s what they do.
To their credit, it's all that they know TO do.
Posted by: Django - N Exile In/Around the 30th Parallel | May 14, 2010 8:15 PM
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Alena
http://smallbusinessgrant.info
Posted by: Alena | May 15, 2010 2:58 AM
I guess the Pentagon must be a liberal Democratic organization. They, too, want curbs put on the these, used- car, Shylocks, after their repeated victimization of young military personal !! It reminds me of the 80 Billion Dollars the Banks carved out for themselves, from the federal financial assistance college program. A great sweetheart deal from the generous Bush&Cheney !! The Banks were extracting service fees from our college fund to assist less-fortunate students, money that could have been used to allowed many more students to attend institutions of higher learning. Thanks to the Obama administration, that swindle is over.
That is one amusing match, the used-car lobbyists against the Military-Industrial complex !! I wonder who will win !!?
SUPPORT OUR TROOPS, BRING THEM HOME, ALIVE AND WHOLE. NOW.
Posted by: Don Fitzgerald, IL | May 15, 2010 9:39 AM
Sen. Jack Reed (D-R.I.) told senators this week about Army Spc. Jennifer Howard of Fort Riley, Kan., who was charged for a moon roof and alloy wheels on her car that she never got.
--------------------
I have tremendous respect for anyone serving in the Military. Thank God for their willingness to serve. Regrettably, I did not. Thank God for Secretary of Defense Robert Gates. I know that people can be busy. I’m busy. Perhaps I have missed something here.
- Is it not possible to look at a damn car and see that it does NOT have a moon roof and alloy wheels? Are car dealers so slick that they can hide a moon roof and alloy wheels?
- If you are forced to sign more forms that you DO NOT read, or can’t read without hiring a lawyer with a high power microscope, are your interests now adequately protected?
My last three cars have come from the same dealership. Me and my car guy, Mike, always have the same debate on exactly what is Bill O’Reilly’s ideology and why does O’Reilly still have so many moments when he just refuses to see truth and light.
- Is it not possible to find an honest dealership where you can have a social experience and negotiate a fair deal as you drive away in your automotive dream?
- Would it not be possible for the counselors at every military base in America to simply put together a list of recommended dealers that have a demonstrated history of fairness and hold them to that? A Credit Union can do this. Surely the Pentagon could do the same.
- Does every perceivable problem in Amerika require 2,000 pages of legislative crap?
When this group of congressional thugs get involved in whatever, they will carve out some action for themselves. Is the real intent to help military personnel or to open up a new front on the on the automotive industry?
I do not believe that every problem in Amerika requires more legislative crap that a real shyster will still find a way to work around. At some point you do have to learn how to manage your personal finances. We have free public schooling. Perhaps the Pentagon could spend a classroom day on personal finances. There have got to be better answers than more legislative crap that will target only God knows what and still fail to solve a damn thing.
Posted by: Django - N Exile In/Around the 30th Parallel | May 15, 2010 1:09 PM
Don't we already pay a "documentation fee" to cover the dealer's cost of paperwork?
Posted by: waynegal | May 16, 2010 4:40 PM
One way to help beat the dealers at their own game (what with their 2-4% markups and all) is to refinance your car loan. I was able to lower my monthly payment by $78 after doing a car loan refinance. Online tools like MoneyAisle.com make it easier than ever, especially now that car dealer lobbyists have earned car dealers this exemption from oversight.
Posted by: Will Reggie | July 15, 2010 1:51 PM