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President Obama attacks auto exemption; Senate vote likely today

Yesterday, President Obama called on the senate to reject a proposed exemption for auto dealers in the financial reform bill (S.B. 3217) and, in doing so, indirectly attacked our interests as boat dealers in this critical legislation. 

Obama’s statement read: “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 the senate will soon consider would do exactly that, undermining strong consumer protections with a special loophole for auto dealer-lenders.”

The reference is, of course, to the amendment proposed by Sen. Sam Brownback, R-Kansas. It would exempt only auto dealers from the new Bureau of Consumer Financial Protection that will be given extremely broad authority to regulate most financial products, including dealer-assisted financing. You will recall last week I urged all marine dealers to call their senators, asking them to request Sen. Brownback include boat dealers in his proposed amendment.

The latest information indicates the Brownback amendment will include boat dealers and could get voted on sometime today. It appears the National Automobile Dealers Association is standing toe-to-toe with the President on this one, and so should we! That’s because Obama is simply wrong in his assertion that an exemption “would allow them (dealers) to inflate rates, insert hidden fees into the fine print of paperwork, and include expensive add-ons that catch purchasers by surprise.” The fact is dealer-assisted financing provides an affordable, convenient and competitive source of financing for car, boat, RV and motorcycle purchasers.

 More specifically, according to our industry’s legislative representatives in Washington, namely NMMA’s Mathew Dunn and MRAA’s Larry Innis, Sen. Brownback has revised his amendment to reflect provisions hopefully acceptable to Democratic senators. These changes consist of:

• Boat and RV dealers will be included in the exemption
• Dealers must be “predominately” engaged instead of “primarily” engaged is selling motor vehicles to qualify to be exempted
• No dealer can claim the exemption if engaged in providing any mortgages, or any financial product or services (i.e. auto title loans, payday lending, or other financial practices that dealers currently do not engage in) unrelated to motor vehicle retailing

That said, however, we cannot assume the Brownback amendment will garner an affirmative vote. Moreover, as I write this (late Wednesday night), we don’t know when, or even if, the amendment will come up on today’s senate agenda.

So, this morning it’s still crunch time . . . and it’s still time, if you haven’t done it so far, to call your senators from your state and ask them to support the Brownback amendment. It will exempt you as a small business boat dealer from onerous new reporting, accounting and other regulatory requirements as if you were a bank. Simply call the Capitol switchboard at (202) 225-3121 and ask for your senators.

Comments

3 comments on “President Obama attacks auto exemption; Senate vote likely today

  1. Mark

    If Obama incorrectly states that the law would allow them (dealers) to inflate rates, insert hidden fees into the fine print of paperwork, and include expensive add-ons that catch purchasers by surprise I assume you are suggesting that dealers do not do this or is there are allready laws in place to prevent this?

    I find it confusing (or suspect) when industries appose a law because they say they do not do what the law is intended to prevent…So what is the harm done then? It will have no effect on the present way of doing business but would prevent future abuses.

    Please explain why this bill would adversly effect dealers.

  2. Jerry

    Mark – you are correct, there are already very good Federal laws in place that protect consumers at the dealer level. The proposed Bureau of Consumer Finance seeks to have individual state financial laws preempt those Federal Laws. National lenders that currently operate under those Federal Laws realize efficiencies due to standardized loan documents, lending guidelines, program administration, and centralized processing. If state financial guidelines preempt the Federal guidelines, lenders will lose these efficiencies by being required to comply with each individual state, and stay current on their laws. One effect of this will be increased costs of doing business, which will mean higher rates to consumers. Due to the difficulty in administration under this plan, some lenders will discontinue doing business in various states, thus limiting their cost to administer their programs. This will lead to fewer lenders, decreased competition, and therefore higher costs of borrowing for consumers. In addition to the Federal regulations that currently protect consumers, the lenders in our industry establish limits and guidelines for terms, interest rates and additional products that can be included in the financing. There are only a few lenders remaining that do business in the recreational finance market. Boat dealers rely heavily on these lenders to finance their customers’ purchases. Without the availability of credit, boat sales cannot be made, and more and more dealers will go out of business. At a time when our country, and the marine industry are just starting to see signs of a recovery, it is imperative that we have strong, competitive lenders to provide credit to our customers. Any legislation that restricts access to credit, or makes obtaining credit more costly or more difficult, will deal another unnecessary blow to our already struggling industry.

  3. Mark

    Thanks Jerry for the explaination. It sounds like your point is at the core of the issue.

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