More Regulation, Less, or Proper Enforcement

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 so oppresive.

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.

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