June 24, 2010
Your Friendly Local Loan Shark

Our pals from the Republican right and the craven Democratic middle of Congress, not content with their recent abasement before the NRA, are now lubing us up for the auto dealers:

There are 18,000 auto dealerships that make loans, and according to the studies of consumer advocates, they often do so using deceptive and predatory practices. Most dealerships do not directly provide the credit for borrowers; they grant a loan and then resell it to another financial company. Often, the dealership charges the borrower a higher rate than the creditor requires — keeping the difference between what the car buyer pays in and the financial company takes back as a kickback. According to the Center for Responsible Lending, those kickbacks make auto dealerships $20 billion a year.

Many dealers offer subprime car loans for borrowers with tarnished or no credit, meaning sometimes that borrowers pay more than twice the value of their car. They use bait-and-switch scams, changing financing terms after the deal is made. One in four borrowers who made less than $25,000 was scammed last year, and one in eight making less than $40,000 a year. People of color are more likely to get bad loan terms. The CRL found that more than half of black borrowers were charged kickbacks, compared with 31 percent of white borrowers.

But they won’t. President Obama has walked back his promise to veto the bill if auto dealers are exempted. And yesterday, House and Senate negotiators agreed to exempt them. “The political reality is that those of us who have fought against an auto dealer carve-out can’t prevail,” Rep. Luis Gutierrez (D-Ill.) said…

Details on the exemption are here. Read ’em and weep.



Posted by Jerome Doolittle at June 24, 2010 04:30 PM
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These guys used to worry me quite a bit. But then I saw small towns die and to be honest, I miss the towns that once had the small operators that have them no longer because all the factories left. I've even known some of these guys and the ones I knew didn't exactly bring home big fat slabs of filet mignon. I'd support an exemption for car dealerships selling less than XXX amount of cars or financing less than xxxx per year. And smush the big time operators who sell thousands of cars a year this way. The little guy with the cigar is not who I picture these days when I think about auto dealerships. I think of the guy bringing home tens of millions of dollars a year and buying up all the car dealerships for a whole automobiles of one brand in a three or five or ten state area. And similar huge car dealerships for used cars some of which are listed on the stock exchange. Those are who I want the exemption to not exempt.

I'd just like to see the guy supporting three children and trying to help his neighbors keep their work ride going make enough to at least get his children through school. I know it ain't the best rationale for allowing a little of it to go on, but I'd just wish the playing field was leveled for the little guy.

Posted by: Buck on June 24, 2010 11:44 PM

Don't be unfair to loan sharks. I used to know some southeast San Francisco RV dwellers who felt that the local loan shark gave them better rates and far more respectful customer service than for example Wells Fargo or B of A.

Posted by: Martha Bridegam on June 25, 2010 12:59 AM
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