By Meagan Wiseley - University of New Mexico/Talk Radio News Service
The Americans for Financial Reform said today they are urging the House Financial Services Committee to reject an amendment that will be proposed by Rep. John Campbell (R-Calif.) to exemplify auto dealers loan financing from the Consumer Financial Protection Agency.
In a conference call Tuesday, President of Consumers for Auto Reliability and Safety Rosemary Shahan said, “the majority of car dealer profits are from the finance and insurance departments, which are much less transparent. Finance managers are paid on commission and their incentive is to maximize profits from the financing and the add ons.”
Shahan said one tactic used by some auto dealers is "yo-yo financing," wherein the dealer will offer a reasonable and competitive interest rate, then switch to a much higher rate and force the consumer to resign a new contract with the higher interest rate.
“If [the consumer] doesn’t want that rate, [the dealer] will threaten to report the car as stolen or put pressure on the consumer to sign another contract with worse terms,” said Shahan.
Shahan also said this financing tactic is more frequently directed towards African Americans and Latinos.
The House Financial Services Committee began the markup of the The Consumer Financial Protection Agency bill last week, and continued through Tuesday. The bill was introduced to the House by Financial Services Committee Chairman Barney Frank (D-Mass.) on July 9, 2009.
In a statement, Frank said, “I am confident that we will produce a bill that will provide greater consumer protections while in no way burdening the legitimate activities of responsible banking.”
Consumer Protection Activists Request Rejection Of Amendment To Financial Regulatory Bill
The Americans for Financial Reform said today they are urging the House Financial Services Committee to reject an amendment that will be proposed by Rep. John Campbell (R-Calif.) to exemplify auto dealers loan financing from the Consumer Financial Protection Agency.
In a conference call Tuesday, President of Consumers for Auto Reliability and Safety Rosemary Shahan said, “the majority of car dealer profits are from the finance and insurance departments, which are much less transparent. Finance managers are paid on commission and their incentive is to maximize profits from the financing and the add ons.”
Shahan said one tactic used by some auto dealers is "yo-yo financing," wherein the dealer will offer a reasonable and competitive interest rate, then switch to a much higher rate and force the consumer to resign a new contract with the higher interest rate.
“If [the consumer] doesn’t want that rate, [the dealer] will threaten to report the car as stolen or put pressure on the consumer to sign another contract with worse terms,” said Shahan.
Shahan also said this financing tactic is more frequently directed towards African Americans and Latinos.
The House Financial Services Committee began the markup of the The Consumer Financial Protection Agency bill last week, and continued through Tuesday. The bill was introduced to the House by Financial Services Committee Chairman Barney Frank (D-Mass.) on July 9, 2009.
In a statement, Frank said, “I am confident that we will produce a bill that will provide greater consumer protections while in no way burdening the legitimate activities of responsible banking.”