One ugly car dealership thing, the rest? status quo
Used car salesman
While we have yet to see exactly what the soon-to-be-signed financial reform bill will do for consumers, we already know who won big: car dealerships.
Auto securities lending is the only significant area of the auto-related financial sector that is subject to more stringent regulation under the bill. These loans, like payday loan programs, are often made on terms that make it nearly impossible to repay the loan, often resulting in the customer losing their collateral, in this case their vehicle, which can suddenly make their loan worse. situation.
According to the Wall Street newspaper, at least six states have moved to regulate auto title lending since 2007. Wisconsin makes them illegal later this year; Virginia regulates them more tightly from October; Illinois caps them at $ 4,000; and others have regulated the rate of interest that can be charged.
Automatic loan: is the status quo enough?
And beyond that, there isn’t much else related to auto loans that will be overseen by the Consumer Financial Protection Bureau, the new federal agency that will monitor mortgages, credit cars, personal loans. and any other type of consumer loan.
While your car loan may be a loan from the same bank or lending institution, it will not be overseen by that agency, leaving uneven coverage by individual states and the Federal Trade Commission (FTC).
This is due in large part to the focused efforts of the National Automobile Dealers Association (NADA), which opposed the new regulation and lobbied aggressively in the weeks leading up to the Vote in the House at the end of last month. NADA has successfully argued that any further regulation could reduce sales, and with all the difficulties the industry is already experiencing, now is not the time to do so.
Of those who sell auto loans in the United States, 80% are “auto dealership lenders”. Dealers can sometimes get slightly better credit for those with good credit than the buyer could get on their own, but low-income buyers or those with poor credit scores may be referred to loans. risky who offer bribes to the dealer. .
Low-income buyers and the military remain targets
Members of the military, along with many senior Pentagon officials, as well as the Obama administration and most consumer groups, have called for additional scrutiny of auto loans, as military families and members of the military, as well as low income buyers, are often targeted by funding programs that exist due to regulatory loopholes or a lack of direct oversight.
Auto Industry Spent Record $ 70.3 Million Lobbying Congress
the New York Times’ Your Money Columnist Ron Lieber last weekend looked at three shady tactics that will likely continue to elude scrutiny:
The Yo-Yo. That’s when a customer is called back to the dealership, told their “approved” financing has failed, and then forced into a higher interest rate loan.
The markup. The dealership actually marks the interest rate on the loan, based on how much you’ll pay, and likely gets a higher bribe for doing so.
The complement. A dealer will add another item, like an extended warranty or window engraving, in the hope that you don’t notice it, or try to convince you that it is necessary to get a particular loan discount or rate. .
For more information, see Lieber’s post. And ask your representatives in Congress how they voted and how they’re going to help make sure there is a little more insight.