President Barack Obama signed the most sweeping set of financial rules since the Great Depression today. The legislation spared auto dealers from oversight by a new Bureau of Consumer Financial Protection while increasing scrutiny of auto lending practices.
White House officials said Tuesday that the new law will level the playing field and grant the consumer watchdog agency oversight of auto loans made by banks or by auto finance companies such as Ford Motor Credit or Ally Financial Inc.
"One of the big objectives of the bill is to level the playing field," said Diana Farrell, deputy director of the White House National Economic Council, said in comments published today in The Detroit News.
"The auto dealer lenders will have a hard time competing with really very high fees or practices against" loans made by banks and auto lenders that will be subject to new oversight.
The bill also gives additional authority to the Federal Trade Commission to continue oversight of auto dealer lending practices.
Consumer watchdogs wanted dealers included under the new agency's supervision. Dealers originate $250 billion in car loans a year, or about 80 percent of all auto loans, the News said. Consumer advocates warned dealers may take advantage of car buyers through hidden fees or other improper practices.
Ed Tonkin, chairman of the National Automobile Dealers Association, said car buyers will benefit from the new law because it preserves dealer-assisted financing as a convenient and affordable consumer option.
"The newly created Bureau of Consumer Financial Protection will have direct federal oversight over all auto loans and those that underwrite, fund or service auto loans, such as banks, credit unions, finance companies and `buy here-pay here` operations at dealerships," Tonkin said. "As the new law is fully implemented, we urge regulators to closely examine how new rules will impact a family's ability to finance a vehicle."
Bloomberg News and Reuters contributed to this report