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Dealers sidestep oversight by new federal consumer protection agency

November 16, 2010

WASHINGTON — The House Financial Services Committee on Oct. 22 approved the Consumer Financial Protection Act but agreed to exempt auto dealers from the agency’s new financial watchdog.

Before the final vote, the committee approved an amendment from. Rep. John Campbell, (R-Calif.) to exempt dealer transactions from the oversight of the new Consumer Financial Protection Agency. Instead, dealer lending still would be regulated by the Federal Trade Commission and the Federal Reserve. The committee approved the Campbell amendment on a 47-21 vote.

"It makes sense to exclude dealers. Dealers had absolutely nothing to do with the credit crisis," said David Westcott, chairman of National Automobile Dealers Association’s government affairs committee and a multi-franchise dealer from North Carolina.

The new Consumer Financial Protection Agency is the centerpiece of the Obama administration’s proposed overhaul of financial regulations, and perhaps itsmost controversial provision.

The agency would have the power to write consumer protection rules for a host of activities involving loans or credit, with the ability to ban products and business practices it determined were "unfair, deceptive or abusive." The agency also would have the ability to examine banks and other companies for compliance with the rules and impose penalties for violations.

The legislation has strong support from Democrats and consumer and public interest groups, which blame banking regulators for failing to adequately protect consumers as the financial crisis approached.

But the new agency is adamantly opposed by Republicans and banking and business groups, which say that it actually would hurt consumers by imposing so many new rules that companies would be forced to charge more for loans and credit — or possibly not offer them at all.

There also is a sharp philosophical divide, with Republicans charging that the agency would take choice away from consumers and place it in the hands of unelected officials.

The House committee approved several amendments clarifying that certain activities would not be swept in by the new agency. Stores that sell gift cards, for example, would not be subject to oversight unless they control the terms of the cards.

Democrats and consumer advocates said they were content to see the legislation survive much of the backdoor political wrangling after such an aggressive backlash by businesses. The U.S. Chamber of Commerce led industry opposition with a $2 million advertising campaign over the summer.

The American Bankers Association said it would continue to try to make its case against the agency as the legislation moves forward in coming weeks.

 

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