WASHINGTON -- Dealers will be largely exempt from oversight by a proposed consumer finance agency under new House and Senate proposals, but dealers would be subject to new disclosure rules that could be written by the agency under a Senate plan.
The Senate amendment also would give the Federal Trade Commission more latitude in writing rules aimed at prohibiting dealers from unfair and deceptive practices.
Senators described the amendment as an attempt to increase oversight a bit over the small number of dealers that prey on young military families and minorities.
The members acknowledged, though, that they do not have the votes to subject dealers to more extensive regulation by the new agency. A 10-9 vote by House negotiators earlier today preserved a measure to to exclude dealers from oversight by a Federal Reserve unit that would be set up to regulate mortgages, credit and debit cards and other consumer financial products.
“I would prefer to have no special treatment for the auto industry,” said Sen. Jack Reed, D-R.I. “But this is much better than no enforcement at all.”
What they wanted
While the National Automobile Dealers Association opposes the Senate amendment, it appears that the 17,000-member group has achieved most of what it sought.
Financial institutions that provide credit to auto consumers will be overseen by the new agency, as will the small percentage of dealerships that offer this financing themselves.
However, dealers that arrange financing will be largely exempt from this oversight.
The amendment still has to be voted on today or tomorrow by House and Senate negotiators trying to resolve differences in the sweeping financial regulation bills passed by the two chambers.
The legislation would then be submitted to the full House and Senate for final votes, and then be forwarded to President Barack Obama for his signature.
The first part of the Senate proposal would give the new agency, which would be part of the Federal Reserve, the authority to write disclosure rules affecting consumer loan contracts.
The Fed would be able to overrule the new agency's rules if it determined that the standard “is somehow inappropriate for auto dealer loans” and publicly explains why, the Senate Banking Committee said in a statement.
These Truth-in-Lending Act rules are a small portion of the numerous regulations that affect dealer financing. Those cover credit discrimination, unfair and deceptive acts, financial privacy and credit-report accuracy.
NADA opposes this proposal because “there is no indication or evidence that the Fed has not done its job in protecting consumers,” said NADA spokesman Bailey Wood.
The Senate amendment also would give the FTC the authority to write rules barring unfair and deceptive practices without requirements that the agency conduct certain reviews.
Eliminating these reviews could lead to unintended consequences that would, Wood said, “make it more expensive and more difficult for car buyers to find affordable auto financing.”