Caving in to Car Dealers

We’re in the final stretch of the House-Senate conference on financial regulation, still waiting to assess the final compromises on the big ticket issues of reining in derivatives and proprietary trading by banks.

But while we wait, we already know that the House capitulated to automobile dealers.

House Dems got the conference to agree on excluding car dealers from regulation by the new Consumer Financial Products Bureau.

Do we care? Only if you think that subprime mortgages had catastrophic consequences for civilization as we knew it.

Car loans are the second biggest financial obligation for most families, and the single biggest for most people who don’t have a mortgage. Eighty percent of car loans are originated by dealers, and subprime lending is a lucrative part of that market.

Need evidence? Check out After BK – “Auto loans for people with good credit, bad credit or even bankruptcy!” Or Smart Car Loan – “Bad Credit OK; Bankruptcy OK.” Or even Christianet – “If we see God First, He will provide everything we need.”

This is very big business. Here’s Auto Express Credit, which actively recruits troubled borrowers who are desperate to buy a car and then markets its database to car dealers:

BANKRUPTCY LEAD MARKETING
Each Monday, our bankruptcy list is updated with all the Chapter 7 filings and Chapter 13 bankruptcies from the previous week.

Subscribers to our Bankruptcy Leads have access to an entire state for one low cost.

The bankruptcy list and lead management system is included at no additional cost with our Premier Lead Service.

“We have multiple subprime lead fulfillment programs for car dealers including our Premier Lead Service, No Sale No Fee program, and Buy Here Pay Here marketing.”

We’ve already learned the hard way that subprime mortgages can cause a world of hurt. We’ve also decided to rein in abusive credit card practices – sky-high rate hikes for no valid reason, huge hidden fees. And the Fed is now restricting those $35 penalty fees on 50-cent overdrafts.

But car dealers, like small bankers, are in every district and they have pitched fits. I’m told that even the Congressional Black Caucus has weighed in on their side.

In fairness, House Democrats weren’t alone in capitulating. House Republicans actually wanted to go a step further, proposing today to exclude car dealers from being regulated by the Federal Trade Commission as well. The Dems shot that done, but it’s cold comfort.

About Edmund L. Andrews 37 Articles

Edmund L. Andrews spent two decades as a business and economics correspondent for The New York Times. During that time, he covered many of the nation ’s most transforming events, from the Internet and biotech revolutions to the emergence of capitalism in central Europe and Russia and the Federal Reserve under Alan Greenspan and Ben S. Bernanke. In 2009 he published BUSTED: Life Inside the Great Mortgage Meltdown (WW Norton), his own harrowingly personal account of the epic financial crisis. He has frequently appeared on major television and radio news programs, from the NewsHour with Jim Lehrer and Today to 20/20, All Things Considered, Lou Dobbs on CNN, the Colbert Show, BBC Worldwide, MSNBC and CNBC.

Ed began his affiliation with The Times in 1988 when he covered patents, telecommunications, and technology. In 1992, he joined the Washington bureau of The Times as a domestic correspondent and reported extensively on the business and politics surrounding the convergence of cable television, the Internet and broadband digital networks. In 1996, Ed became The Times’ European economics correspondent and its Frankfurt bureau chief. He returned to Washington in 2002 and became the bureau’s lead economics correspondent and The Times’ main eyes and ears on the Federal Reserve.

Prior to joining The Times, Ed worked as a magazine writer specializing in business and economics. Before that, he was an assignment editor for Cable News Network in Washington and an education and city government reporter at The Sentinel-Record in Hot Springs, Ark.

Ed graduated magna cum laude from Colgate University in 1978 with high honors in international relations. In 1981, he received a master’s degree in journalism from Northwestern University. He is married to Patricia Barreiro and has four children – Ryan, Matthew, Daniel and Emily.

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