Editor's note: An earlier version of this story incorrectly identified the Senate committee in the 10th paragraph.
WASHINGTON -- Both the National Automobile Dealers Association and its Obama administration opponents have stepped up their lobbying of senators in anticipation of this week's vote on whether to exempt dealers from oversight by a proposed consumer financial protection agency.
NADA is predicting victory in the upcoming vote on a dealer-exemption amendment to the financial regulation bill. The amendment is being introduced by Sen. Sam Brownback, R-Kansas.
“We think it will be a very close vote, but we believe we will prevail at the end of the day,” NADA lobbyist and spokesman Bailey Wood said in an interview today.
The dealer group sent a note today to all 100 senators arguing that the proposed new agency “would have new, overly broad and unprecedented powers with no real oversight,” a copy of the note shows.
The three-page note said dealers “are already effectively regulated” by the Federal Trade Commission, the Federal Reserve and state agencies.
NADA is targeting about a dozen uncommitted senators from both parties, Wood said. The group has been urging each of its 17,000 members to contact both senators in their states.
The Brownback amendment would exempt dealers from oversight by a proposed consumer protection agency within the Federal Reserve while leaving the financial institutions that offer dealer-assisted financing under Fed supervision.
Brownback, who is running for governor of Kansas, also has predicted that his amendment will pass.
The amendment is being opposed by a coalition that includes the U.S. Treasury Department, Pentagon, groups of military families, consumer advocates and civil rights organizations.
These opponents met with representatives of the Senate Banking Committee and dozens of senators' aides Wednesday, May 5, says several participants in the meeting.
A deputy assistant treasury secretary, Eric Stein, distributed a paper called “All Auto Financing Should be Covered by the Consumer Watchdog,” said Treasury spokeswoman Meg Reilly.
The two-page paper said customers are currently “unprotected from the minority of dealers and lenders that sell unfair auto loans with hidden fees,” according to a copy provided to Automotive News by the spokeswoman.
The Treasury paper singled out military families as having been “a target of unscrupulous lenders because of their demographic characteristics.”
Treasury's paper added that only the largest dealerships would be overseen by the proposed agency, leaving most individual dealers outside its supervision anyway.
The paper also confronted NADA's principal argument about current regulation by noting that the FTC has not brought an auto financing case since 2000 because of its limited resources.
Reilly declined to predict the outcome of the Senate vote.
Dealers vs. mortgage brokers?
A report given to Senate staffs last week by the Cambridge Winter Center for Financial Institutions Policy, a nonprofit research group, compared dealers to mortgage brokers.
Dealers routinely mark up loan offers; can obscure the pricing of car stickers, loan rates and fees, and aftermarket services; and often get incentives from lenders that cloud price transparency, said the 14-page report prepared by the New York-based researchers.
The Brownback amendment reflects a “growing comfort with special-interest subsidies that distort free markets in favor of the largest and most politically entrenched participants,” Cambridge Winter's November report said.
The National Council of La Raza, the biggest Hispanic civil rights group in the United States, issued a release last week that said dealers “are looking for a special deal when it comes to financial reform.”
Dealers are “some of the worst offenders when it comes to predatory and abusive financing practices against Latino and African-American communities,” the civil rights group said.
At last week's meeting of the amendment's opponents, the Leadership Conference on Civil and Human Rights distributed a paper that said dealer markups involve the dealer “arranging financing at terms worse than what the consumer qualifies for.”
These markups amount to $20 billion a year “in unnecessary finance expense,” the nonprofit Washington group's paper said.
Bills moving through
The Brownback amendment could be considered by the Senate as early as tomorrow, a spokesman for the Kansas senator said.
The amendment seeks to change a provision in the sweeping financial regulation bill, crafted after the financial meltdown of the past two years.
A portion of the legislation would create a new federal agency dedicated to consumer financial protection. In the House bill, the agency would be a stand-alone agency and not part of the Fed.
The measure passed the House with an exemption for auto dealers that was introduced by Rep. John Campbell, R-Calif., himself a former dealer.
Similar legislation passed the Senate Banking Committee and is due to be considered by the full Senate this week. If it passes the Senate, any differences between this measure and the House bill will have to be addressed by a conference of congressional leaders.