Dealers win exemption from Consumer Finance Protection Bureau

Dealers win exemption from Consumer Finance Protection Bureau

The nations automobile dealers will not be subject to regulation under the proposed Consumer Finance Protection Bureau (CFPB) as part of Finance Reform legislation agreed to by House and Senate conferees this week. Instead, they may be subject to closer scrutiny by the Federal Trade Commission (FTC), which already oversees their financial activities under the Truth in Lending Regulations, Regulation M and other consumer protection rules. This extra measure of FTC regulatory oversight of dealers, now adopted by the conferees, is only triggered when the agency identifies consumer protection problems, at which point it can do rulemaking.

The developments came as a compromise between Senate and House conferees who had been at near polar opposites on the subject of whether dealers should or should not be regulated by the proposed CFPB, with the Senate majority aiming to include them (despite a 60 to 30 vote by the Senate instructing the conferees to adopt the House position) and the House majority voting to exclude them.

This is an extraordinary victory in Congress for dealers, resulting from the intense lobbying campaign organized by NADA where individual dealers and their association leaders from the Automotive Trade Associations network (ATAE) from across the country pressed Congress with a flood of correspondence and face to face meetings to explain the industrys position. It also came in the face of formidable political opposition from both conference committee chairmen, Rep. Barney Frank (D-MA) and Sen. Chris Dodd (D-CT) and President Obama himself, all of whom pushed hard to include dealers in the regulatory purview of the super agency, CFPB.

NADA reported the dealer exemption from CFPB was in hand earlier this week, only to then be confronted with the fallback position from the forces to regulate dealers that became the enhanced FTC oversight. Just the same, it is noteworthy that NADA, with ATAEs support, was able to make the FTC proposal far less onerous than it was originally conceived.

FTC currently oversees dealer lending and advertising practices and will continue to do so. The enhanced FTC authority would streamline agency rulemaking such that the prospect of more FTC oversight of dealers becomes more of a factor than is the case currently.

The House plans to vote on the bill Tuesday and the Senate next week as well. The votes are expected to be close in both houses. Indeed, Sen. Dodd, who chairs the Senate Banking Committee, said he didn't know for sure that he had preserved his 60-vote majority in the Senate, in the face of all the changes. Nonetheless the betting money is on passage of the legislation, with President Obama signing it into law before July 4th.

WANADA salutes NADA and all the dealers whose hard work went into exempting dealer F&I operations from Finance Reform.