In what is the first second official White House statement specific to any proposed amendment to Wall Street reform, the President Obama is throwing his weight into defeating a Brownback amendment that would exempt auto dealers from new consumer protection laws.
Throughout the debate on Wall Street reform, I have urged members of the Senate to fight the efforts of special interests and their lobbyists to weaken consumer protections. An amendment that the Senate will soon consider would do exactly that, undermining strong consumer protections with a special loophole for auto dealer-lenders. This amendment would carve out a special exemption for these lenders that would allow them to inflate rates, insert hidden fees into the fine print of paperwork, and include expensive add-ons that catch purchasers by surprise. This amendment guts provisions that empower consumers with clear information that allows them to make the financial decisions that work best for them and simply encourages misleading sales tactics that hurt American consumers. Unfortunately, countless families – particularly military families – have been the target of these deceptive practices....
We simply cannot let lobbyist-inspired loopholes and special carve-outs weaken real reform that will empower American families. I urge the Senate to continue to defeat the efforts of special interests to weaken protections for all American consumers.
The industry, with the help of some House Blue Dogs and Republicans, was able to get the exemption in the House bill, carving auto dealers out of the oversitght of the Consumer Financial Protection Agency. Kansas Republican Brownback is leading the effort in the Senate. In response, the White House has not only deployed Obama himself, but also a critical ally Republicans will have a hard time bucking--the Pentagon.
In February, Clifford L. Stanley, the under secretary of defense responsible for troop readiness, wrote in a letter addressed to a Treasury official that the Pentagon would "welcome and encourage" increased protections against "unscrupulous automobile sales and financing practices."
Mr. Stanley reached that conclusion, he wrote, after an internal survey of domestic military bases revealed cases of " ‘bait and switch’ financing, falsification of loan applications or other documents, failure to pay off liens on trade-in vehicles, ‘packing’ loans with items whose price tag bears little or no relationship to their actual cost or value, and discriminatory lending."
For Matthew Garcia, a 25-year-old Army specialist stationed at Fort Hood in Texas, a car deal gone sour has been "one more giant thing to worry about" as he prepares for a deployment to Afghanistan as early as June.
Consumer advocates call it the "yo-yo deal." In September, Mr. Garcia found a 2005 Dodge Neon he liked at a used car lot near the barbershops, tattoo parlors and check cashing stores that invariably line the main roads just outside any military base.
He agreed to a deal in which he would pay 19.9 percent interest on a $12,000 loan and signed what he believed was a binding contract. He drove off. But several days later the salesman summoned him back to the lot, Mr. Garcia said, to tell him the financing had fallen through.
He had signed only a conditional contract, he was told. If he wanted to keep the car, he would need to put up an additional $2,500 in cash. Mr. Garcia refused, but by that time someone had blocked his car so he could not leave. He said the dealership would not return his $1,500 down payment.
"I was tricked, manipulated and lied to," said Mr. Garcia, who earns about $20,000 a year. "And I feel like it was intentional."
"Who, us?" the wide-eyed auto dealers query. "The impetus for this legislation was to correct the ills that caused the economic meltdown," Mr. Tonkin [chairman of the National Automobile Dealers Association] said. "We don’t belong in this bill." It's a smart move from Dems to use the experience of military personnel to counter this from the autodealers, and it goes beyond sternly worded letters from Pentagon functionaries. David Dayen reports:
Senators Jack Reed and Dick Durbin hosted an unusual ally in their efforts to stop this amendment from passing – Holly Petraeus, the wife of CentCom Commander David Petraeus. She related stories of veterans getting ripped off by unscrupulous practices in auto lending. In one story, she talked about a Jeep buyer who ended up paying $16,000 total for a $4,000 vehicle. Many of the worst car dealerships set up shop just outside military bases, conveniently located to prey upon consumers....
Sen. Reed made the important point on the call that the exploitation of consumers doesn’t stop with military families, but he called that particular situation "most dramatic." Asked by FDL News if the Senate would be able to win out in conference, if they stopped the Brownback amendment from passage, considering that the House did pass a carve-out for auto dealers and that they have a lot of sway with politicians in local communities, Reed sounded optimistic. "I believe our prospects are good in conference. We’ll have a position bolstered by the evidence," he said. And the White House opposes carve-outs to consumer protection.
The vote on the Brownback amendment could come tomorrow.
