Credit union backs off ads blasting dealer reserve

UPDATED: 7/22/14 12:33 pm ET -- correction

Editor's note: A previous version of this report contained incorrect information. A corrected version that was published in the July 21 print edition of Automotive News appears below. 

A Florida credit union has backed off from an advertising and social medial campaign called “Expose the Truth,” which described dealer reserve as an unfair trade practice most consumers don’t know about.

The campaign, kicked off in June and initially scheduled to run through August, has been canceled, Space Coast Credit Union of Melbourne, Fla., said last week. It added in a written statement: “Our aim is to help our members make informed financing decisions. The campaign was not about auto dealers or the people selling vehicles.”

The campaign had prominently cited a consent order among Ally Financial, the Consumer Financial Protection Bureau and the U.S. Department of Justice, saying that Ally was “ordered by U.S. government agencies to pay back $80 million to victims of rate markups.” One ad showed a blindfolded credit union member and the message: “Only 21 percent know the truth. Do you?” Another ad showed the same individual with the blindfold removed and the message: “I know the truth about rate markups.”

The “truth,” the campaign had said, was that lenders approve a loan at the lender’s buy rate and then “bump” the interest rate “for no good reason.” The credit union cited the Center for Responsible Lending, a longtime critic of the auto finance industry, in saying the average rate markup is 2.5 percentage points.

The credit union’s 2013 annual report shows it had 57 branch locations and originated $563 million in auto loans in 2013.

The National Automobile Dealers Association, in a written statement, had called the campaign “nothing more than a rehash by another competitor of previously discredited arguments.”

NADA has said repeatedly that the average dealer reserve, which it considers a fee to compensate dealers for finding financing for customers, is well below the commonly applied rate caps of 2 or 3 percentage points and is often less than 1 percentage point. NADA also insists that the lender’s buy rate is not intended to be the customer’s retail rate. Said NADA in its statement: “The truth is that dealer-assisted financing offers consumers great value and competitive advantages, allowing car buyers to save billions of dollars each year.”

You can reach Jim Henry at

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