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Banks, Dealer Group Trying To Slow Reform Legislation

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On: Wed, May 25, 2011 at 10:07AM | By: Tim Healey

Banks, Dealer Group Trying To Slow Reform Legislation

A well-known dealership group and bankers are working hard to slow, or stop, upcoming reform legislation.

The National Automobile Dealers Association (NADA), along with captive financing agencies, credit unions, and banks, is supporting the efforts of congressional Republicans to reduce the power of a new government consumer finance agency that is positioning itself as a watchdog for consumers.

At issue are new regulations that the government would like to enact regarding dealer-assisted financing for car buyers.

In the latest chapter of a fight that's been going on for two years, the dealer group and banks are trying to get the government to curtail the agency's powers so that they don't have to worry about complying with the regulations.

The U.S. Consumer Financial Protection Bureau was created in response to the financial meltdown that brought about the Great Recession, and the U.S. Federal Trade Commission was also given more power to create new rules due to the recession.

The agency has jurisdiction over lenders, but not new car dealers.

Dealerships and lenders loathe any more regulations, but the Obama administration wants to cut down on fraud and predatory lending practices. The agency starts work July 21.

It's no surprise that dealers would fight the new rules. The unscrupulous will hate to have more rules that could get them in trouble or fewer loopholes to exploit; while legitimate dealers might worry that new rules will add additional costs in terms of money and time.

On the other hand, confusing loan contracts and predatory lending led in part to the burst of the housing bubble and the recession, and there have been reports in the media of similar activity in the automotive sector. Many consumers are already wary of dealerships and automotive financing, and perhaps the new rules will change that.

Either way, the battle has set up along typical battle lines—Republicans who prefer limited business regulation and the businesses that might be affected in one corner, and a Democratic administration that prefers to protect consumers in the other.

This isn't the first of these types of battles, nor will it be the last.


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