Civil Rights, Labor, Consumer Protection, & Advocacy Groups
OPPOSE the Auto Dealer Exemption
June 16, 2010
Dear Financial Reform Conferee:
On behalf of the undersigned organizations, we strongly urge you to reject any language in H.R.
4173 that would exempt auto dealers from the proposed Consumer Financial Protection Agency
(CFPA). While the sale of a car itself should not fall within the jurisdiction of the CFPA, auto
dealers who originate or broker loans should not receive any special treatment under H.R. 4173.
Much like the mortgage industry, some auto financing practices have become predatory and
abusive in nature, with dealers frequently steering too many car buyers into loans that are more
expensive than they need to be. Auto sales and service complaints, typically related to predatory
lending practices at dealerships, now rank #1 among complaints lodged with state and local
consumer protection agencies. Because motor vehicles are the second-largest purchase most
consumers make, and the average price of a new car is now more than $28,000, the
consequences can be drastic.
Moreover, as numerous studies and class action litigation have shown, there is overwhelming
evidence of racial and ethnic disparities in the auto lending process, with minority car buyers
paying significantly higher interest rates on dealer-originated loans than non-minority buyers
with the same credit scores. Because of woefully inadequate regulations and policing by
existing overseers, it took a considerable amount of class action litigation to bring these
problems to light.
While much of the auto finance industry is now subject to class action settlements that prohibit
racial and ethnic disparities, many of these settlements are set to expire soon. Under the industry
carve-out included in the House-passed version of H.R. 4173, the same problems could easily
recur. In the meantime, young people purchasing their first cars and members of the Armed
Forces remain highly vulnerable. Financial st