Senator Elizabeth Warren (D-Mass) wants Congress to give the Consumer Financial Protection Bureau more control over auto dealers.
As justification, she cites a Center for Responsible Lending study that dealer markups are costing car buyers $26 billion annually.
It isn’t possible to refute her numbers without knowing what constitutes “dealer markups” and the rationale behind the dollar amounts attributed to them.
But what is the senator saying?
Is she saying the Federal Trade Commission has proven itself incapable of regulating the retail sales segment of the automotive industry, and so the power to do so must now be transferred to the CFPB?
If, as she is quoted, auto loans are “the most troubled consumer financial product,” then are the lending institutions – under the direct control of the CFPB – parties to the dealer cabal?
Is she saying that consumers lost $26 billion because they financed at the dealership selling point rather than borrowed money directly from their local bank or credit union – many of which have wholesale lending arrangements with dealers?
Is she saying dealers should absorb the cost of soliciting the financing, negotiating mutually acceptable terms, generating and disclosing the funding documents and processing the paperwork – transactional expenses assessed to borrowers regardless of the funding source?
What’s unquestionable is Senator Warren’s disdain for dealers. It’s a matter of public record. The 2016 presidential election campaign is ramping up, and widely publicized statements such as “keep that $26 billion a year in the pockets of consumers where it belongs” are political chits if she plays her hand right.
On the other hand, the National Automobile Dealers Assn. has been diligently gathering in-store installment funding and consumer-leasing data. The goal is to replace political pap with credible facts.
David Robertson is the Executive Director of the Association of Finance & Insurance Professionals.
