Automobile dealers may soon fall under the oversight of the Consumer Financial Protection Bureau (CFPB) if U.S. Senator Elizabeth Warren succeeds in finding a co-sponsor for just such a bill. This spring, Warren stated in speeches that the CFPB has supervision over mortgages, credit cards, and checking accounts, but it does not have complete management over the auto loan market. This is because the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is usually called Dodd-Frank, provided an exception for auto dealers.
Dodd-Frank was enacted into federal law by President Obama in 2010 as a way of increasing accountability and transparency in the financial services industry. The law was passed in response to the Great Recession, and has implemented the most important changes to U.S. financial regulation since the reform that occurred after the Great Depression.
The Auto-Dealer Industry
Despite Warren’s efforts at regulating the largest type of unregulated debt owed by consumers, she does not have the support of other senators. The bill lacks enthusiasm because of the status held by auto dealers, who are located in every district. Many auto dealers are owned locally by families and together they employ over a million employees. There are numerous lobbyists in the industry, who have succeeded in preventing auto dealer regulation. According to the National Auto Dealers Association, the matter was settled five years ago by members of both political parties and thus, there is no interest in reopening the issue.
Even after the financial crisis of 2009, the auto dealer industry seems to be immune from regulation. Democrats and Republicans alike wish to maintain the unregulated condition of loans made at dealerships. Note that the CFPB can regulate car loans that are not made at dealerships.
During the 2014 election, car sellers contributed approximately $10 million to legislators who were running for the House or Senate. According to the Center for Responsive Politics, the majority of the contributions came from individuals associated with dealerships.
However, auto dealers are also trying to garner support from the same lawmakers in hopes that they will be in favor of laws that would make it challenging for the CFPB to admonish auto dealers to exercise caution when setting interest rates on auto loan packages. The CFPB issued such a warning in 2013.
The warning consisted of a statement to car sellers to be mindful of laws that make certain that consumers are treated in a just manner. The CFPB also admonished them that the habit of reducing interest rates for some consumers can engender great risk that there will be pricing differences based on race, national origin, and other forbidden factors. However, a House bill would have the effect of repealing the agency’s 2013 warning, and compel the agency to gather opinions prior to issuing such a warning in the future.
If lack of oversight can really lead to pricing differences on the basis of factors that are prohibited, then perhaps more regulation of the auto industry is needed.
Should I Consult an Attorney?
If you think that you have been subjected to unfair lending practices regarding your auto loan, you should consult a consumer protection attorney who can determine whether your lender has violated consumer protection laws.
Authored by Roxanne Minott, LegalMatch Legal Writer and Attorney at Law