Lending » Members of the military are susceptible to loan schemes, advocates argue.
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WASHINGTON » The nation's 18,000 auto dealers are trying to cut themselves a deal in the Senate, seeking exemption from proposed consumer regulations that would police how they write car loans.
The Obama administration is pushing back, using the Pentagon to make the case that soldiers are particularly vulnerable to high-interest car loan schemes.
"No one counts the car dealers out," said Ed Mierzwinski, consumer program director at U.S. PIRG, a consumer advocacy group. "The car dealers are like the small banks -- they are everywhere."
The dealers argue that when it comes to lending to car buyers, they are mere intermediaries for financial institutions that ultimately process and service the loans.
In waging this fight, they stand between the president and the success of a vast rewrite of financial regulations that Obama is determined to sign into law. A House version of the bill already excludes auto dealers from new consumer financial rules. By standing firm now, the administration hopes the Senate version prevails.
The debate over a special carve-out for auto dealers, who have a high visibility in their local communities, comes as Senate Majority Leader Harry Reid, D-Nev., seeks to wrap up debate over the broader regulatory overhaul later this week. Reid planned to seek a vote to end debate on Wednesday, which would require 60 votes to pass. If successful, the Senate would have until Friday to dispatch remaining issues.
Sen. Sam Brownback, R-Kan., is leading the effort for the dealers with an amendment that would specifically carve them out of the bill's consumer protection provisions. While the American auto industry is reeling economically, the last thing dealers need is additional regulations, their allies argue.
Auto dealers, however, still make money from the loans. Consumer advocates argue that's enough to place them under extra scrutiny. The Pentagon has been especially aggressive in opposing an exemption for auto dealers, initiating its campaign after the House agreed to exclude dealers from its bill.
Army Secretary John McHugh weighed in with a letter last week to Senate Banking Committee Chairman Christopher Dodd, D-Conn., voicing his objection to Brownback's amendment. 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.
Dealers maintain they already are well regulated at the state level and that extra regulations will simply create additional costs that would be passed on to consumers.