Auto Loans Among Key Issues Soon to be Decided by Lawmakers

[Jun 21, 2010.]

 

Auto Loans from Dealers to be Regulated?

Consumer groups have been concerned for some time that unscrupulous dealers have been tricking unwary car buyers into auto loans that are unfair and/or too expensive. As a result, many want the financial reforms that are currently being considered on Capitol Hill to include supervision of dealerships' lending--and loan brokering--activities.

The House bill excluded dealer auto loans from its provisions, but the Senate made no such exclusion. Now, CNN Money reports, negotiators are due to meet June 22 in an attempt to resolve this and other differences. And they hope to have all issues agreed by Friday, June 25.

Auto Loans Debate--One Point of View

The Washington Post recently carried a commentary that neatly encapsulated the argument for regulation. It pointed out that car dealers often mark up auto loans. And it continued:

...auto dealers can decide which lender to use for the deal, and the auto dealer can decide to use the one that will pay the biggest markup. This business model makes the industry ripe for predatory dealers looking for easy money.

The Post went on to quote a May 13 letter from Michael Donley, the Air Force Secretary, in which he expressed his dismay at the impact that predatory auto loans have on the military. He said: "...Airmen who are distracted by financial issues at home decreases readiness. Protection from unprincipled automobile lending enables our Airmen to concentrate on their primary mission -- fly, fight and win in air, space and cyberspace."

Last year, the Center for Responsible Lending came up with a whole list of what it termed "scams" and "abuses" that it alleged occur routinely on some auto dealers' lots. And it claimed that these practices cost American consumers $20 billion a year.

Auto Loans--The Other Perspective

Of course, every argument has two sides, and the auto loans one is no exception. Associated Press ran an article recently that explored the unintended consequences that often arise when financial services are regulated. It suggested that the currently proposed rules could add to dealerships' costs, and that this might force up the amount that car buyers pay for auto loans sourced on dealers' lots.

Meanwhile, the National Automobile Dealers Association (NADA) argues that leaving dealerships unregulated "keeps credit affordable and accessible," and that "false allegations by various groups were an attempt to confuse lawmakers."

Auto Loans and You--a Way Forward

Whatever your personal views on financial regulation, you can avoid any chance of dealer "scams" and "abuses" by finding free quotes for many sorts of cheap auto loans--including no credit check loans.

 

About Author:

Peter Andrew has been writing about -- and for -- business for more than two decades. For the last couple of years, he has found himself increasingly specializing in the U.S. financial sector.