WASHINGTON -- Auto dealers successfully deflected Washington's push for new financial regulation, winning exemption from oversight by a new agency to be created under a sweeping bill agreed to today by House and Senate negotiators.
The new consumer-finance agency, housed in the Federal Reserve, would oversee mortgages, credit cards and other consumer financial products in the wake of the biggest economic meltdown since the Great Depression.
But dealers' role in arranging loans for customers would not be subject to supervision, enforcement or rule-writing by the so-called Consumer Financial Protection Bureau.
Instead, the agency would oversee the financial institutions including Ally Financial that extend credit to auto customers, as well as the few dealers that provide direct financing themselves.
Dealers would continue to fall under the supervision of the Federal Trade Commission and state authorities.
The conference agreement represents a hard-fought victory for NADA over a powerful coalition that included President Barack Obama, the Pentagon, senior Democratic lawmakers, military families, consumer advocates and civil-rights activists.
'Burdensome and unnecessary'
“The goal all along was to keep a new, untested government agency from creating burdensome and unnecessary rules that would make it harder and more expensive for car buyers to access auto credit,” NADA spokesman Bailey Wood said today.
The House's lead negotiator, Rep. Barney Frank, D-Mass., conceded last night that he didn't have the votes to get the supervision over dealers that he and other congressional leaders wanted.
Consumer advocates acknowledged that dealer lobbying carried the day, but said car buyers would be the losers.
"Billions of dollars in consumer financial transactions will escape the scrutiny of this important new agency," said Jack Gillis, spokesman for the Consumer Federation of America and author of The Car Book.
Ally Financial, the renamed parent of automotive financier GMAC, is one of the many financial institutions that would fall under the purview of the new consumer agency. It extends credit to General Motors and Chrysler customers.
"While we have not seen the final language of the financial provisions yet, we understand both Ally Financial and dealers would be subject to regulation in making auto financing available to consumers," according to a statement released by Ally today.
"We hope that ultimately the new rules will enable both the lender and dealer to best assist consumers as they finance their vehicles."
Ford Motor Credit Co. also will be affected.
"The regulations still have to be written. But we already have stringent processes that ensure our customers are treated fairly and the financing process is understandable," said an e-mail statement from Ford Credit. "We support efforts that ensure available consumer financing and well-functioning credit markets."
Taking too long
In a modest concession to the Obama administration, negotiators agreed to allow the FTC to speed up the writing of standards affecting dealers.
Democratic lawmakers complained that the FTC takes as long as eight years to prepare a rule because it must subject proposals to unusual reviews that other federal agencies aren't required to conduct.
Last night, the only remaining difference between the House and Senate proposals was whether the new consumer agency would have authority to write some rules affecting dealers.
The final conference agreement did not provide this limited authority, Wood said.
The agreement is to be submitted to the full House and Senate for votes next week, and then to Obama, who has indicated he plans to sign it.