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:
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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.