McClatchy/Tribune News | President Barack Obama on Wednesday
warned that exempting auto dealers from a new consumer protection agency
would hurt buyers and let dealers continue “deceptive practices.”

The nation’s 20,000 new-car dealers have blitzed Capitol Hill the last
two weeks, seeking to be cut free from the agency that would oversee
consumer lending, part of a package of financial reforms expected to
move through the Senate in the next several days. They’re backing an
amendment by Sen. Sam Brownback (R-Kan), that would exempt auto dealers’
lending from new oversight that would still apply to banks and finance
companies such as Ally Bank, the former GMAC.

In his statement, Obama said leaving dealers out of the bill would let them “inflate rates, insert hidden fees into the fine print of paperwork and include expensive add-ons that catch buyers by surprise.

“This amendment guts provisions that empower consumers with clear information that allows them to make the financial decisions that work best for them and simply encourages misleading sales tactics that hurt American consumers,” Obama said.

Dealers have maintained that their finance businesses are covered by federal and state regulators and did not deserve regulations meant to crack down on abuses by Wall Street banks that led to the 2008 credit crisis, which spurred a global recession. They’ve also warned that the bureau would inevitably limit credit to consumers.

The financial reform bill that passed the House last year excluded auto dealers after a similar lobbying push.

But a growing coalition of consumer advocates, community banks and the Defense Department have pushed back against the auto dealers’ efforts, saying dealers who craft loans for consumers should face the same kind of oversight as mortgage brokers, who make similar offers.

“If I’m a customer, I ought to have the same level of consumer protection at a loan office from an auto dealer as I have at a loan office in a bank,” said Steve Verdier, director of congressional affairs for the Independent Community Bankers of America.

U.S. Sens. Dick Durbin (D-Ill) and Jack Reed (D-RI) said Wednesday that keeping dealers covered by the proposed Consumer Financial Protection Bureau was an essential part of cracking down on abusive lending practices.

“It makes no sense that we would exempt auto deals from common-sense recommendations,” Durbin said.

Obama and Senate Democrats have been bolstered by the Defense Department, which has said unscrupulous auto dealers often see service members as easy targets for expensive loans.

While a vote on the amendment was expected this week, it could be delayed into next week.