Consumer advocates want Congress to make auto dealers subject to regulatory oversight

Advocates want consumer agency to watch auto sales

RALEIGH, N.C. — Consumer advocates argued Wednesday that Congress should include auto dealers under the oversight of a proposed finance industry watchdog.

“Drive by any car dealer lot. They’re not advertising cars. They’re advertising ‘get your financing here,’” said Peter Holland, a consumer attorney in Annapolis, Md.

The U.S. House was debating legislation Wednesday that would establish a federal Consumer Financial Protection Agency responsible for making banks, credit card companies and mortgage lenders treat the average person fairly. House passage could come as early as Friday.

The agency would oversee companies that actually provide auto financing, as well as used car dealers that offer “buy here, pay here” financing. Franchised auto dealers would be exempted from regulation.

But consumer advocates say auto dealers are writing the financing deals and therefore should be regulated.

“When you allow the same product to be regulated in different ways by calling it something else, you wind up with a race to the bottom in terms of standards,” said Kathleen Day, a spokeswoman for the Durham-based Center for Responsible Lending. An amendment by U.S. Rep. Mel Watt, D-N.C., would extend regulations to auto dealers.

Auto dealers argue oversight is unnecessary because the agency would regulate the banks and finance companies that fund and service the loans that dealers arrange. Auto dealers would continue to be regulated by the Federal Trade Commission and state laws, the National Automobile Dealers Association said.

“There are already a great deal of state and federal laws that govern the activities of auto dealers. Many of the things that consumer groups are alleging are illegal and have been illegal for some time,” NADA spokesman Bailey Wood said.

He pointed to practices such as forging loan documents so that borrowers qualify for a high-priced vehicle and selling a car without providing the title, problems which advocates say continue to plague consumers even with current oversight.

Sgt. Diann Traina said she bought a 2000 BMW at a small used car lot near Fort Bragg in June 2007 and made months of payments while waiting for the seller to deliver the title she needed to register the car. It never came.

Military service members or their attorneys said Wednesday similar problems are common near installations including Camp Lejeune, N.C.; Camp Pendleton, Calif.; and Fort Stewart, Ga. They spoke on a conference call organized by the group Consumers for Auto Reliability and Safety, which supports broader federal consumer regulation of auto dealers.

Traina said that during a 15-month mission in Iraq her husband got a military lawyer to write the finance company a complaint letter. The lawyer advised Traina to quit paying her car loan until she got her title. The car lot subsequently went out of business, but the finance company repossessed the BMW and is trying to collect on the balance of the debt, she said, a black mark on her credit history and with her superiors in Army psychological operations.

“I was sold a car that wasn’t mine, that was never going to be mine, and they’re telling me that I still owe for that vehicle,” said Traina, who is now working with a civilian attorney.