La Raza Calls For Rejection Of Special Deals For Auto Dealers

Auto dealers having been hitting the Hill hard, seeking a loophole in the “Restoring American Financial Stability Act of 2010” (S. 3217), which aims to put an end to the reckless practices of Wall Street and the abusive and discriminatory tactics used by finance companies of all stripes. However, providing auto dealers with a special exemption is shortsighted. Dealers compete directly with community banks and credit unions for auto loan customers. They are often directly involved in setting the price, terms, and structure of the auto loans they sell. Moreover, in yet another likeness to the mortgage industry, research has shown that Latino and African American borrowers are disproportionately charged higher markups than their White counterparts.

“For many Latino families, just like that first home, buying a car is a major life purchase that establishes credit history and helps families access better jobs,” said Janet Murguía, NCLR President and CEO. “At a time when millions of Americans are struggling to make ends meet, the Senate should be thinking more about how to put families back on the path to financial security.”

Despite the evidence, the current regulatory regime has not acted to protect borrowers seeking to make the second most significant purchase of their life―their car. The proposed Consumer Financial Protection Bureau (CFPB), included in S. 3217, would bring existing consumer protection laws under one roof, thereby reducing layers of bureaucracy and ensuring that all companies involved in selling auto finance loans are playing by the same rules. However, a “carve-out” for auto dealers would have the effect of creating different rules for certain lenders involved in the same business. This would be a hefty consequence in a market that already lacks the transparency necessary for families to make apples-to-apples comparisons while shopping for an auto loan.

Civil rights organizations, including the NAACP, the National Urban League, the Leadership Conference on Civil and Human Rights, and the National Fair Housing Alliance, are joining the call and asking Congress to resist the hard sell by the auto industry to be exempt from CFPB. Loopholes will only put special interest before hardworking families at a time when they can least afford it.

"Just like mortgage lenders who got rich by steering people of color into high-cost and predatory home loans, too many car dealers are lining their pockets with the discriminatory kickbacks they take when they mislead African American and Latino car buyers,” said Shanna Smith, National Fair Housing Alliance President and CEO. “Individual financial duress may be more difficult to see than blocks of foreclosed homes, but that does not make it any less real,” Smith continued.

“The Leadership Conference urges members of the Senate to oppose any amendments that create loopholes for auto dealers,” says Nancy Zirkin, Executive Vice President of the Leadership Conference on Civil and Human Rights. “Dealers routinely act as lenders and brokers with the discretion to set the terms of credit. Too often this has resulted in African American and Latino borrowers being charged higher markups than their White peers. We must reject exemptions for unethical players seeking to escape laws aimed to protect hardworking families and enforce fairness.”

“The Senate’s proposed Consumer Financial Protection Bureau must live up to its stated ideal by protecting consumers from debt traps wherever they lurk,” says Cy Richardson, Vice President of Housing and Community Development at the National Urban League. “Predatory auto dealers’ fraudulent financing schemes must receive the same scrutiny as those employed by banks and other institutions providing consumer financial products or services.”

“The NAACP is honored to join NCLR and other civil rights organization, as we call on the U.S. Senate to reject exempting auto dealers from crucial anti-predatory lending protections in the bill,” says Hilary O. Shelton, Director of the Washington Bureau of the NAACP. “Research and lawsuits have uncovered a pattern of marking up loans to African American borrowers, particular African American women. Millions of Americans rely on their cars to get to work each day. They should be ensured equal treatment whether they finance their car at a dealer, credit union, or bank.”

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