WASHINGTON -- Draft legislation to create a consumer financial-protection agency will exempt auto dealers from new regulation, House Financial Services Committee Chairman Barney Frank said today.
An Obama administration proposal to establish the agency as part of a broader effort to tighten financial oversight in the wake of subprime mortgage, credit card and securities scandals had been opposed by the National Automobile Dealers Association.
The association contended that dealer-assisted loans were not as susceptible to manipulation as other financial products and were already sufficiently regulated.
“NADA is pleased that Chairman Frank has indicated that auto dealers are not to be regulated by this new agency,” NADA spokesman Bailey Wood said. “The chairman's decision reflects the fact that dealers are already subject to numerous federal and state financial regulations.”
He said NADA would not decide whether to change its position on the bill until it can review the legislative language.
NADA mobilized 500 dealers and dealer representatives at its Washington conference last week to lobby against the bill. The association has joined forces with the Chamber of Commerce, banks, mortgage lenders and auto finance companies.
Frank, D-Mass., said in a letter yesterday to other Democrats on his committee that he would soon release a legislative draft that would make changes to the administration's proposal.
The letter lists businesses that would not be subject to regulation by the new agency, including auto dealers, accountants, real estate brokers, lawyers and others.
“CFPA will not disrupt merchants, retailers and other nonfinancial businesses or subject banks and other depository institutions to needless additional regulatory burdens and costs,” Frank's letter said.
Frank has scheduled a Sept. 30 hearing to discuss formation of the new agency.
The nonprofit Consumer Federation of America, which is lobbying for the bill, expressed disappointment at Frank's decision.
"The exception concerns us given the occasional sketchy track record of some auto dealers on consumer lending, especially with minority consumers," said Travis Plunkett, the federation's legislative director. "It doesn't make sense to us that there should be one set of regulations for banks that offer auto loans and another set for dealers that offer auto loans."