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A battle is brewing on Capitol Hill over the new Consum... A battle is brewing on Capitol Hill over the new Consumer Protection Bill (DW212, Flickr).

For decades now, auto dealers have been down in the trenches, lobbying state and federal officials against any proposed legislation that they think might impact their bottom line. But in a battle brewing on Capitol Hill this week, dealers are facing a more formidable opponent: The U.S. Department of Defense.

The issue at hand is a proposed Bureau of Consumer Financial Protection, part of the larger financial reform bill presently being debated by the Senate. Sponsored primarily by Democratic Sen. Chris Dodd, Connecticut, the legislation would offer consumers protections from unethical lending and selling practices by auto dealers, among other things. Where the Pentagon comes into the debate is that some military groups have raised accusations of widespread predatory lending and other unseemly practices among auto dealers when selling vehicles to military personnel.

In a letter supporting the creation of the new bureau, Clifford L. Stanley, the Defense Department’s undersecretary for personnel and readiness, said that it could actually bolster the “mission readiness” of troops by protecting them from these practices. “Any legislation that would enable and empower our military would be welcome,” wrote Stanley.

But Republican Sen. Sam Brownback, Kansas, is sponsoring an amendment that would exempt car dealers from these provisions. The National Auto Dealers Association (NADA), which represents about 17,000 car dealers nationwide, supports this amendment.

The pair may be engaged in an uphill battle, however, as soldiers engaged in the ongoing wars in Iraq and Afghanistan engender considerable positive public sentiment. The Military Coalition, a collection of 31 advocacy groups representing 5.5 million active-duty soldiers, veterans and their families, have told Congress that Brownback’s amendment would allow “unscrupulous dealers to continue to take advantage of service members and their families.”

“After buying a home, buying a car is the biggest purchase most of us make. And a lot of military families rent, instead of buying a house, so the car purchase is actually the biggest expense for many of them,” said Katie Savant, spokesperson for the National Military Family Association. “So we want to make sure our troops are protected from unethical practices.”

Treasury Secretary Tim Geithner has also supported the creation of the new Bureau and the DOD’s position.

Susan Weinstock, financial reform campaign director for the Consumer Federation of America, a nationwide consumer advocacy organization, says the new Bureau is needed, and that car dealers should absolutely be included in its provisions.

“We’ve heard many reports from the various military-aid groups about auto dealers targeting military personnel, especially younger soldiers and marines who are just 18 or 19 years old,” said Weinstock. “These young people are ripe for the picking, because they don’t have their parents with them to guide them, and they’ve been subjected to all kinds of unscrupulous practices, like ‘yo-yo financing.’”

This ploy unfolds when someone buys a car, gets it financed, signs the paperwork, and thinks they’ve completed the purchase, said Weinstock. But then the dealer calls and says that the financing fell through and the car must be returned. When the buyer does return the car, they find that the dealer has already sold their trade-in vehicle, and a new loan is offered with a high interest rate.

Weinstock says some dealers will even “pick up the soldier at the base, drive him three hours to their dealership, and then refuse to drive him back, saying the only way he can get back is by buying a car, knowing that if he doesn’t get back in time, he’ll be classified as AWOL.”

The NADA issued a statement that reads, in part, “the broad authority granted to the Bureau of Consumer Financial Protection seriously threatens to limit dealer-assisted financing and the convenience and competition this financing offers consumers and service members at all economic levels. Since 94 percent of vehicle sales involve financing, it is essential to preserve dealer-assisted financing and affordable credit for consumers and the military. Optional dealer-assisted financing is often the most affordable financing available to service members.”

Raymond Ciccolo, president of Village Automotive Group, which includes seven different Boston-area dealerships (including Nissan, Honda, Cadillac and Volvo) is opposed to car dealers being regulated by the proposed Bureau. Ciccolo said that auto dealers are already well regulated by other agencies and laws, like the Federal Trade Commission, the Truth in Lending Act, and the Fair Credit Reporting Act.

“This is an egregious overreach by the government,” said Ciccolo, who said he served in the Marine Corps Reserves many years ago. “Most new car dealers are middlemen when it comes to the financing part. We act as a broker and place these loans through banks and finance companies. If we’re included in this new agency, we’re just going to have to hire another person, or more than one person, because it’s not clear yet what the new regulations will entail. And that’s going to cost us money.”

While the FTC technically has the authority to regulate auto dealers, said Weinstock, there’s little enforcement when it comes to the selling and financing of cars. “It has only brought one or two cases against dealers over the last 10 or 20 years,” she said, “and it hasn’t brought an auto financing case since 2000.”

Auto dealers generate more complaints to state and local consumer advocacy groups than any other line of business, according to Weinstock. 

When told of these accusations, car dealer Ciccolo said that new car dealerships could never get away with such practices. “Our investments are in the millions, and the car manufacturers control us like you wouldn’t believe,” he said. “The carmakers know that one of the most effective ways to gain market share is to provide excellent customer service. If one of us pulled something like what you described, we’d lose our franchise.”



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  • 274 Comments
      mouse
      • 7 Months Ago
      Why do some people seem to always be taking advantage of any opportunity to degrade a forum? Why is it that Republicans as a group [not individuals] seem to be pro war and anti soldiers?
      SPODITUCKER
      • 7 Months Ago
      Anyone doing this to our Troops should have their head dented with a monkey-wrench clean down to the crack of their sorry ass.
      • 7 Months Ago
      the dealers say "its going to cost us money ".....how freekin funny is that....pigs
      bmw20415
      • 7 Months Ago
      More often then not, car dealers are going to go out of their way to show their appreciation for what our armed forces mean to us. They protect our way of life. As the individuals who serve, most car people strive to do their best as their way of saying thank you. The dealers that are surviving today are those whom choose wisely the way they contuct their business. Those stereo-types you have refered to are out of the new car business as we speak.
      • 7 Months Ago
      This trickery isn't limited to servicemen and women...it happened to my 21 year old daughter right here in Cleveland, OH at a Lakeshore GM dealer who seems to no longer be doing business. They signed her papers, sent her home with the car, let her drive it for a week, sold her tradein car and then called to say the loan fell through and she needed to bring the car back. Of course she was devastated and being the good mother I try to be, well you know what happened - I ended up signing for it and then when my income dropped by 80% during the hardest part of the recession and she was out of work, the bank ended up taking the car back - leaving me with a big ding on my credit. Believe me I would have loved to organized a class action lawsuit to keep these guys from ever doing this again.
      Gale
      • 7 Months Ago
      That is dispicable! These young men and women are out there serving their country and there are vultures like that out there just waiting to pounce on them! Shame on them! They should be sanctioned and their license to sell should be revoked! These people have no concsious to do that to our service men and women. My son is getting ready to come home in a month or so from the Army, I'll be sure to warn him of such practices.
      • 7 Months Ago
      gmjc7: what a pathetic character you are. Just another teabagger who doesn't understand anything, kneejerk Glenn Beck junkie. Well screw you! as for LIVE FREE OR DIE I call BS on you - you're not from New Hampshire. The government exists to *********** citizens - what about that do you not understand?
      • 7 Months Ago
      this is outrageous, why does the government do this?
      • 7 Months Ago
      Let the dealers know that if they try to jerk you around while you are deployed or your family if you are killed that your buddies will settle with them, and it won't be pretty.
      cdavecrz
      • 7 Months Ago
      It was noted in the article that theres already a government group that is supposed to watch over car sales but don't. What the hell is another group of government employes at government pay and retirement going to do for the military but raise our taxes,, and the price of a car? Read the article,, like you should a salesform or contract, then comment or buy. You can't protect idiots,, and you can't make the government do its job.
      • 7 Months Ago
      This abuse is not new. In 1951, I bought a used car in Junction City KS (Fort Riley) and was sold a lemon. When I went to pay off the loan in order to get rid of the car I found out I owed more than the price paid for the car even though I had already made three monthly installments payments. My complaints went unanswered and I was stuck with paying the finance company more than I had borowed. More power to Senator Dodd !!
      tideh
      • 7 Months Ago
      When my huband and I bought a car years ago, just after he got out of the service we signed our papers and the new car was ours, my husband goes to pick it up and is told we owe more money down because the used car we turned in was leaking oil and they didn't know that at the time, (mind you they drove the car and checked it out) and my husband had to sign a note saying we owed more money or the dealership would not give us the new car, my father called his lawyer for us and told us what to do we got our new car and the dealership was not happy. Young people especailly should go with someone when buying a car or anything for that matter, this way it will help them learn or get an idea that they might be getting riped off. It was a good experience for me especially since we won.
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