StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Caving in to Car Dealers

24 Jun 2010
Posted by Edmund L. Andrews

We’re in the final stretch of the House-Senate conference on financial regulation, still waiting to assess the final compromises on the big ticket issues of reining in derivatives and proprietary trading by banks.

    But while we wait, we already know that the House capitulated to automobile dealers.

House Dems got the conference to agree on excluding car dealers from regulation by the new Consumer Financial Products Bureau. 

Do we care? Only if you think that subprime mortgages had catastrophic consequences for civilization as we knew it.

Car loans are the second biggest financial obligation for most families, and the single biggest for most people who don’t have a mortgage. Eighty percent of car loans are originated by dealers, and subprime lending is a lucrative part of that market.

Need evidence?   Check out After BK – “Auto loans for people with good credit, bad credit or even bankruptcy!”   Or  Smart Car Loan – “Bad Credit OK; Bankruptcy OK.”   Or  even Christianet – “If we see God First, He will provide everything we need.”

This is very big business. Here’s Auto Express Credit, which actively recruits troubled borrowers who are desperate to buy a car and then markets its database to car dealers:


Each Monday, our bankruptcy list is updated with all the Chapter 7 filings and Chapter 13 bankruptcies from the previous week.

Subscribers to our Bankruptcy Leads have access to an entire state for one low cost.

The bankruptcy list and lead management system is included at no additional cost with our Premier Lead Service.

    “We have multiple subprime lead fulfillment programs for car dealers including our Premier Lead Service, No Sale No Fee program, and Buy Here Pay Here marketing.”

We’ve already learned the hard way that subprime mortgages can cause a world of hurt.   We’ve also decided to rein in abusive credit card practices – sky-high rate hikes for no valid reason, huge hidden fees. And the Fed is now restricting those $35 penalty fees on 50-cent  overdrafts.

But car dealers, like small bankers, are in every district and they have pitched fits. I’m told that even the Congressional Black Caucus has weighed in on their side.  

In fairness, House Democrats weren’t alone in capitulating. House Republicans actually wanted to go a step further, proposing today to exclude car dealers from being regulated by the Federal Trade Commission as well. The Dems shot that done, but it’s cold comfort.


Car-dealers have more clout than DOD

One of the government agencies that weighed in loudly in favor of having car-dealers included was the Pentagon. They have a terrible time with car-dealers who exploit young kids, especially with families, around military bases. The young troops get scammed and wind up in awful financial trouble. It's especially bleak if one of the parents is deployed while nasty debt collection proceedings are going on back home. The stats and stories are disgusting, and I had hoped that "supporting the troops" was going to be enough to kill the car-dealer carve out. No such luck, it seems.

Fantastic irony: Reading

Fantastic irony:

Reading this post through my RSS Reader and at the bottom is a Google ad that reads:
"Easy Bad Credit Auto Loan"
"If you make $375/week you Qualify. Bad Credit & Bankruptcy are Welcome"
www web2Carz com

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