Auto dealers won’t be covered under a new consumer regulatory agency after a vote in the House Financial Services Committee exempting them, despite the major role they play in financing car loans.
Among those supporting the Republican amendment that passed last week, by a vote of 47-21, was Rep. Ed Perlmutter, D-Golden, whose suburban Denver district is populated with some of the metro area’s largest dealerships. The amendment had been blasted by consumer advocates, who claim that dealers are both responsible for originating the majority of new car loans and regularly bilk customers by offering them higher interest loans than their credit histories would otherwise allow.
Thirty-eight consumer organizations signed on to a letter sent to the Financial Services Committee, criticizing the amendment. The letter complains that car dealers offer financing to their customers to buy new cars, often selling those loans almost immediately to third-party auto finance companies. Those dealers profit on the loans through fees that are partly based on the interest rate, the higher the interest rate, the higher the fees. The sales managers tell car buyers they shopped around and found them the best interest rates they could get, when they actually qualified for lower rates. It’s exactly the kind of scam that the new agency is supposed to prevent, but the vote for the amendment means it is unlikely to change anytime soon, according to critics.
Perlmutter told The Denver Post Thursday, the exemption was justified because dealers will still be subject to existing state and federal regulations. “It is important to enact responsible regulatory reforms that do not have unintended consequences of drying up the availability of affordable and stable credit to consumers,” he said.