Automotive News reported on the 24th of June this year that auto dealers
were getting closer to a complete exemption from oversight by the new
consumer finance agency being created under the financial-regulation bill.
The report further states that "House negotiators voted to oppose
a Senate proposal to give the new agency authority to write some rules
that affect [automobile] dealers," said Rep. Barney Frank, D-Mass.,
the top negotiator.
The essence of this wrangling is that one group of legislators wants the
power to regulate everything and another would be pleased with no reuglation
at all. Having seen dealer financial abuses when evaluating
California lemon law cases, it's hard to understand how the National Automobile Dealers
Association (NADA) justified a position of no regulation for the auto
sales industry, even as other organizations [banks and other financial
istitutions] won't be able to breath in without being asked why they
did that and then file fifty forms in septuplet explaining everything.
What is enough regulation? How much oversight is enough? These questions
have a subjective and an objective answer. Here is an example fitted to
the subjective response. You make a deal to buy a car at your local dealer.
The interest rate is 5%. You are okay with the deal and drive home with
your shiny new car. Two days later you get a call from the dealer telling
you the deal has fallen through because the bank or funding company did
not approve your loan. You are going to hae to bring your shiny new car
back. Mysteriously the salesman has found another lender but the interst
rate is 14%. If you don't accept the deal the dealer might even charge
you for the use of their nice new car. If you aren't seriously irate
you should be. This is personal for the buyer. This is betrayel after
trust and few human interactions are as painful. For the person in this
situation, any rules put in place to protect him from predatory salesmen
are going to look great.
When laws are enacted that control those who are doing business decently
as well as those taht cheat, it is an uneven distribution of punshiment
and control. Those who are not abusing the consumer quite reasonably feel
falsely accused, and those who bend the rules and cheat outright will
now look for loop holes to go on doing what they've always done.
People in California understand very well the cost of over regulation.
Hardly a day goes by that another business doesn't "protest with
their feet", as the saying goes. They go where the regulations aren't
The choice for a legislature is difficult, that's understandable. What
they give to one inevitably means they will have to take from another.
In this case perhaps it would be better to follow an ancient saying that
states, "A gentle hand may lead even an elephant by a hair."
Too much regulation is obviously destructive. Too little encourages abuse.
The Automotive News report further states "both the Senate and House
proposals would exempt dealers from supervision and enforcement by a new
consumer agency lodged in the Federal Reserve." This smacks of the
naked abuse of power. It would seem even the least cynical that some sort
of back room deal was made.
It's hard to disagree with the removal of special exclusions, that's
just more government "business as usual." The immediate reaction
of one in the lemon law business is to put some serious control over the
dealers. As the report concluded, "dealers who are not reputable
and are engaging in unsavory practices to the disadvantage of consumers,
ought to have a process in place where they can be addressed immediately,"
said Rep. Melvin Watt, D-N.C.
It would be an interesting project to research the laws controlling the
activities of automobile dealerships. Who would be surprised to find a
hundred laws that already apply to dealership abuses, but that there is
insufficient will, personnel and money to enforce them? Certinaly not
leading California lemon law firm, Norman Taylor & Associates where
consumers go to for help with not only their dealer fraud cases, but lemon
law cases as well.