FTC plans deep dive into auto leasing
Auto leasing will be the focus of the third Federal Trade Commission roundtable on auto finance when dealer advocates, consumer groups and regulators meet Nov. 17 in Washington.
The roundtable, possibly the last in a series held by the FTC, could lead to stiffer dealership lending regulations.
According to the FTC, panel topics for the Washington roundtable are:
Understanding vehicle leasing
Identifying widespread leasing practices
Dealing with consumer protection issues in vehicle leasing
Identifying effective ways to educate consumers
Identifying practices that harm consumers and finding potential remedies
When the FTC announced the series of roundtables earlier this year, it said there would be "three to five." The first was in April in Detroit, and the second was in August in San Antonio.
In a notice announcing the Washington roundtable, the FTC asks: "What have we learned from the roundtables and where do we go from here?" That suggests the Washington session may be the last. But an FTC spokesman said no decision has been made on how many roundtables will be held. The commission is accepting requests from prospective panelists until Nov. 4.
In past roundtables, consumer advocate groups have listed abusive practices, such as so-called yo-yo financing. The groups say yo-yo financing occurs when a dealer makes a customer come back after delivery to sign a new contract for more money.
Groups representing auto lenders and dealers have conceded that abuses occur, but they insist that abuses are not widespread. They also say that F&I transactions already are subject to more than enough regulation.
So far, a central disagreement has been over the dealer reserve, often called dealer markup. That's the difference between the interest rate the customer pays, and the rate at which the lender buys a contract from a dealer.
Consumer advocate groups say the dealer markup is arbitrary, unnecessary and subject to being applied in a way that could amount to discrimination.
Auto industry groups point out that:
Indirect lenders don't lend money to customers at the rate the lender buys a contract from a dealer.
Even after the dealer reserve is added, rates on indirect loans are still lower than direct-to-consumer loans from banks.
Auto lending already is subject to anti-discrimination regulations.
You can reach Jim Henry at firstname.lastname@example.org.