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Should auto dealers be exempt from regulation by the Consumer Financial Protection Bureau, as proposed in the House's financial reform package?


As Ben Bernanke, Barney Frank and Timothy Geithner help shape the financial-regulation overhaul in Congress, people who know them say they may be willing to negotiate on parts of the bill they don't view as core, while being intractable on pieces they view as elemental.  That could mean agreeing to allow auto dealers to be exempt from new lending rules.

Should auto dealers be exempt? Would the new rules prevent them from lending to otherwise qualified customers with troubled credit, and prevent people from getting the automobiles they need? Would the regulatory oversight strain the auto industry, still struggling to emerge from the credit crisis?

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  • What is good for one group involved in financial offerings, or what amount to financial offerings, should be applicable to all.

    This White House and Congress seem to be drawn to "special deal making", especially behind closed doors, as evidenced in the final passage of HCR, most of which was created behind closed doors.

    What happened to that "Transparency" Obama & Company promised during the campaign, and then promptly ignored when he took office? Obama and the Congress are equally corrupt. I fear that the GOP is no different.



    Everyone should be exempt!



    The only difference between a car salesman and a stockbroker is that the stockbroker wears more expensive neckties.

    1 Recommendation


    Yes, auto dealers should be exempt from regulation by the Consumer Financial Protection Bureau. Dealerships had nothing to do with the financial meltdown. Dealers are not banks and do not underwrite, fund or service loans. Existing regulators and stiff competition keep dealer-assisted financing affordable for car buyers from all walks of life.



    Yes, Auto Dealers should be exempt. Auto dealers work directly with lending institutions securing loans for the consumer. In many cases, Auto Dealers are able to negotiate with the lending institution to consider the applicant that would otherwise be turned down. Auto Dealers are able to direct the financial institutions to look pass the credit score and consider each applicant on their own merits and qualities. If Auto Dealers are not exempt the consumer may lose a very important avocate in securing the financing they need.



    Obviously most of the people making comments about the Auto Dealers have no idea what they are talking about and have no knowledge what so ever of the industry. Just because you bought a couple of cars, doesn't make you an expert. I've spent my entire career in this business and it's a shame that some people have such a negative view on our industry. We provide a much needed service and make things very convenient for the consumer. Imagaine if you had to go to the dealer, find a car yourself, get a write up, drive over to your own bank, apply for a loan, sign the papers at the bank, drive back to the dealer, bring them a check, now something changes and you decide to add something to the car, now you have to drive back to the bank, re-apply for a larger amount, sign the papers at the bank again, have another check cut, drive back to the dealer, sign papers at the dealer and then drive away with your car. Do you know how much time this would take? It would be a horrible experience. A dealer can have you in and out with financing within 2 hours or less. You don't have to drive anywhere else and your driving your new car in no time. We are not the enemy. Yet just because most salemen work on commission, the public thinks we are out to get them, this is just not true. Making a living is not a crime, do you work for free? Think about it, that's what you are asking us to do...



    I am absolutely opposed to standard retail (non-BHPH) dealers being subject to this bill. Automobile dealers are currently subject to previously imposed rules and regulations that virtually eliminate any malpractices that the Consumer Financial Protection Bureau is going to be charged with regulating and preventing.

    The rules and regulations that are currently in place appear to be working to the full benefit of all parties concerned, i.e., the consumers, the automotive focused lenders, and the automobile dealers themselves.

    One must ask the following question; Is redundancy the answer to a system that is working well and when does redundant regulation become overburdening. The current burden of regulation presents such a burden that it borders on being impossible to be in complete conformity with.

    In 1928, Supreme Court Justice Louis Brandeis stated “The greatest dangers to liberty lie in insidious encroachment by men of zeal, well meaning, but without understanding.” I believe that today we have far exceeded the warning cloaked in his overwhelming insightful statement.

    A conditional sales contract is a contract drawn between a seller and a buyer. The buyer can choose to hold the contract and collect the full value of the contract (principal and interest) or he can choose to sell the contract at a discount from full face value.

    A seven percent contract may be sold with a five percent discount, which I have done on several real estate contracts; thus, upon assignment to a third party, the seller might receive only the full principal on a seven percent contract leaving the buyer of the contract with seven percent income, or the seller may receive the full principal plus two percent leaving the buyer with a five percent interest income which he would obviously deem sufficient or he would not purchase this financial instrument.

    One must realize that the contract belongs to the seller, thus, he should be able to keep his own property or to sell his own property for what ever price that suits his particular needs at the time. It is not uncommon for a seller to sell a contract for less that the principal due, thus leaving the buyer with the stated interest rate plus any discount from the principal that the seller is willing to give. This is obviously a two-way street that is built to serve the cash needs and cash flow of businesses.

    Conditional sales contracts that are made when a buyer purchases a vehicle from an automobile dealer work exactly the same way in every respect.

    The automobile dealer will generally sell the contract and receive the principal amount upon assignment of the contract to a lender. If the dealer holds a contract for a seven percent contract rate he may sell it to a lender with a lower rate “buy rate” such as five and one half percent, thus the dealer earns a cintigent additional one and one half percent on the sale of contract. This one and one half of a percent is generally credited to a “dealer reserve account” and in the case of repossession the one and one half percent is generally removed from the reserve account to cover part of the losses sustained by the buyer of the contract.

    I have frequently heard the term "Kickback" when automobile financing is mentioned. Because of the legalities involved, the term “Kickback,” referring in this case to the one and one half percent, can be used only by those without any true understanding of finance or business law.



    As a business manager at a dealership in Illinois I have put a great deal of thought in to this specific topic. There really aren't any strong positives to leaving dealers in this group but there are a great deal of strong negatives. Yes, dealerships make money by providing financing to customers. In most cases, it's not a lot of money but it is still a way we get paid regardless. If you were to get rid of dealership financing, (1) customers would have to obtain their own financing. For some customers, specifically the credit challenged, this would become increasingly difficult. Where would you tell someone to get financing if none of the local lenders would provide them with a loan? So if someone has no transportation and needs a new car, maybe they won't be able to get one or have to spend days or weeks trying to figure out how to get a loan. Even the better credit consumers would have disadvantages. Would they know where to go to get the best rates? Could they easily pit 2 or more banks against each other to get the rate lowered? For most people, it's a simple and resounding NO. Doesn't sound like a benefit to consumers to me.

    (2) We would cost many Americans jobs. Say there are 20,000 dealerships in the USA that average 2 finance people per store (a low figure). That means there are 40,000 Americans out of work instantly if dealers are a part of this bill. Dealerships also hire office workers to handle sending off the contracts and dealing with payment from the banks. Let's just say each store has to get rid of 1 of those workers since they no longer have work for them... 20,000 more people out of work! Now, why do I need all these sales associates when I have less customers coming in because they can't arrange financing. I guarantee every store will have to average AT LEAST 1 of these workers being let go. Another 20,000 just like that. That's 80,000 workers out of work pretty immediately! Really, can our economy handle that right now? We haven't even begun to discuss the indirect lending departments that work specifically with dealerships. Their whole department becomes obsolete! What, another 80,000? We could play this game all day because it would be a horrid chain reaction. Is that a road we can afford to go down?

    Honestly, I could go on for quite a while but this has been winded enough and those are the 2 strongest arguments for keeping dealers out of the bill. If this doesn't make sense to you or you don't think those are true statements, you need to really sit down and play out all of this in your head. How else could it really work out? I promise those two major negatives would happen immediately.


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