Why is President Obama focused on forcing expensive regulation onto dealerships as if they are banks?
President Obama is on a mission to make sure a financial collapse like we recently experienced does not happen again. I think we can all applaud this greater vision. However, he is making a serious miscalculation in executing his reform that could affect us all in the auto industry.
We all know that dealerships help customers get financing for their car purchases, but that dealerships themselves are NOT the lenders who underwrite the loans. Dealerships help consumers by connecting them to banks, credit unions and manufacturer lending sources. Most dealerships simply act is a customer liaison to the loans; the dealers themselves are not banks.
The President's financial reform bill regulates big banks; however the way it is written it also includes dealerships in the regulation. This would be expensive for dealerships to comply with and it could actually reduce consumers lending options, which would in-turn cost the customers more money. It’s not a good thing for our industry, or consumers, the way it is written.
Senator Brownback has proposed an amendment that exempts non-lending dealers from this additional regulation. Basically he is saying, “Dealerships are not banks and should not be burdened with being regulated as such.” Naturally, those dealerships that are also banks would be regulated under his amendment, but there is no need to make non-lending dealers comply with bank regulation.
There has been a major political fight brewing and mud being slung in both directions. Even the military & Pentagon have gotten involved slamming dealerships in the press saying they unfairly target and take advantage of consumers and thus should be under regulation. Last week even President Obama made a very misleading statement that targeted auto dealerships and painted the picture that dealerships are taking advantage of customers. This is not good PR for our industry regardless of how the vote is passed. Dealerships are filled with good people trying to correct the bad reputation our industry has, we don’t need politicians, especially the Commander in Chief, publically insulting us with misleading statements.
The facts are the Brownback amendment exempts non-lending dealerships from this regulation. Those stores are not banks and should not be regulated as big banks.
Regulating all dealerships in the way the financial bill states could limit dealerships ability to help consumers get loans. This would make it harder for customers to buy cars and could even cost more money. We saw during the congressional hearings for the bailouts, few politicians understand the car business. Many didn't even understand the relationship between dealerships and manufacturers, and now it appears they dont understand the relationships between dealerships and banks.
The NADA has been defending us on Capital Hill and the vote to pass or reject Senator Brownback’s amendment could happen as early as today. Has your dealership called your Representatives to tell them that you are not a bank and do not need to be regulated as such? Do you support the Brownback amendment? You should. Here is more info from the NADA
The industry has had enough hurt over the last 18 months; we don’t need more self-inflicted wounds from our Commander in Chief. Does it feel like our industry is becoming much less of a free market? First, forced dealership closures... now this. What’s next...?