Finance Reform, excluding dealers, passes Congress

Finance Reform, excluding dealers, passes Congress

The Senate signed onto sweeping financial overhaul legislation yesterday, making the passage of Finance Reform by Congress official, and delivering to President Obama another check off on his ambitious public policy agenda. The House had already passed the bill before the July 4 recess.

The good news for franchised automobile dealers with the passage of this extensive banking legislation, of course, is the exclusion from it of dealership F&I operations, which were originally part of each version of the bill. Had F&I remained in the legislation, dealerships would have been thrown in with credit extenders, and then subject to oversight of the Bureau of Consumer Finance Protection (BCFP), which the new Finance Reform law will establish. Predictably, this would have had a devastating impact on dealership F&I, given the wide ranging, independent regulatory reach the BCFP will have. Accordingly, NADAs leadership of the successful lobbying effort to take dealers out of Finance Reform is a huge win for dealers.

Republican Sens. Susan Collins (Maine), Olympia Snowe (Maine) and Scott Brown (Mass.) joined all but one Democrat in support of the legislation. Sen. Russ Feingold (Wis.) was the lone Democrat opposed to the measure, which he said was not tough enough on the banking industry.

The president is poised to sign the bill into law within days, a little less than two years after the worst financial crisis since the Great Depression enveloped the broader economy.

The bill is very similar to legislation Obama proposed last year to regulate the $600 trillion derivatives market: create a new council of regulators to assess risks across the financial system; create a new system to manage failing financial firms; and create a vast consumer protection agency to oversee products like home loans and credit cards.

Just how this is all going to be done will have to await the writing of regulations, but consumer advocates and financial lobbyists are already preparing for years of debate before the federal regulatory agencies that will implement Finance Reform.

Serious work remains; the proof of the bill's worth will come not from what is written in the bill, but how the regulators interpret it, write the rules and then enforce them, said John Taylor, president and CEO of the National Community Reinvestment Coalition. Based on the job they did for the past decade, I will believe reform is here when I see it.

Meanwhile, franchised auto dealers can breathe a sigh of relief, knowing that their comprehensive effort to stave off misdirected regulation has succeeded. WANADA commends NADA for a job well done.