The House Financial Services Committee approved a controversial amendment, opposed by Chairman Barney Frank, to exempt auto financing from independent dealers from the oversight of the Consumer Financial Protection Agency. The vote was 47-21, with a large number of Democrats joining with Republicans. I’ll have the full committee breakdowns for you when I get them. The panel did approve the creation of the CFPA by a 39-29 count, ignoring the massive lobbying campaign trying to kill it outright.
The auto dealer exemption is probably the worst amendment in the entire Financial Services Committee markup on regulatory reform. You can make a case for some of the other amendments, and Rep. Frank said on Rachel Maddow’s show last night that the committee will pass the reform bill today that gives Democrats and the Administration “90% of what we wanted.” But this is part of that other 10%. Auto financing is typically the second-largest purchase a family makes, behind housing, and the horror stories of auto loan customers being ripped off are voluminous. The amendment was authored by Rep. John Campbell (R-CA), a former auto dealer who has been ripped by consumer groups for having major conflicts of interests.
The consumer groups, which also include organizations that want election reform, say that Campbell should walk away from his amendment for two reasons. First, because six auto dealerships pay him rent and would benefit from his amendment and he would benefit. And second, that Campbell received $170,000 in campaign contributions from auto dealers since he’s run for Congress.
The groups say Campbell’s personal financial disclosure forms show he received between $600,000 and $6 million in rent last year.
Campbell’s “defense” is that four of the six properties are no longer car dealers, having gone out of business – so two still are, and the amendment will directly shield them from oversight. He also says that the House Ethics Committee approved him authoring the amendment, without giving details. It turns out that Campbell recused himself from a vote last year on bailing out the automakers, based on a conflict of interest, but in this case, writing the amendment exempting them from oversight is OK with him.
Mary Boyle from Common Cause expressed her disappointment with the passage of Campbell’s amendment. “This is the kind of case that illustrates clearly why we need public financing. There’s the conflict of interest issue, and also just the clear benefit Rep. Campbell is providing to contributors.” According to Boyle, Congress is shying away in general from strong consumer protections in the regulatory reform bill. “This shows the power of Wall Street,” she said.
The AP details some other exemptions:
Under pressure from industry, the Financial Services Committee has carved out numerous exemptions to agency oversight, including retailers, auto dealers, real estate brokers, lawyers, cable companies and accountants.
Banks that help those businesses complete financial transactions would still fall under the agency’s purview. For example, a bank that issues a store-brand credit card or provides auto financing would be subject to agency rules.
Rep. Gwen Moore, a Democrat from Wisconsin with a major private mortgage insurer in her district, on Wednesday pushed though another exemption for credit, mortgage and title insurers.
Rep. Barney Frank, who chairs the panel, said exceptions were being made to clarify that the agency will monitor financial products and not every financial transaction made by the American public. But he scoffed at several Republican proposals, including one by Rep. Tom Price, R-Ga. that would have exempted student loan providers. Frank charged that those provisions were aimed at gutting the bill.
Overall, a win to get the CFPA passed, but it has been gutted to a certain extent.
…Shahien Nasiripour has some more information about the derivatives markup in the House Agriculture Committee. The short version is that oversight will be increased, but some transactions by the big banks will be allowed to remain secret, sadly.
The Agriculture Committee’s bill, shepherded by Chairman Collin Peterson (D-Minn.), does increase oversight of these previously mysterious and exotic financial instruments, experts say. Many derivatives trades would now have to go through clearinghouses or an exchange. But there are exemptions. In an effort to protect companies like airlines and manufacturers that use derivatives to hedge against things like price fluctuations and currency exchange rates, these so-called end-users would not be required to make public the terms of their contracts. Rather, they would continue to operate in the dark.
But Peterson on Wednesday amended the bill to extend the exemption to big banks and financial institutions, as long as their contracts were with these end-users.
UPDATE: Change Congress has an act.ly petition on this, demanding that Congress cancel the exemption from oversight for car dealers. It’s at act.ly/ps.




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The amendment was authored by Rep. John Campbell (R-CA),….
Pretty much all I needed to read. (R-CA) translates pretty much exactly into “crooked motherfucker”.
don’t candycoat it, kid!
gotta agree with you though….
when is congress going to wake up out of their coma and realize that industry should write their own rules? Why do we need congress if they do?
Very precise interpretation. I like it.
Looks like the clunkers are going to have to be resold to pay for the next massive bailout for the auto guys who appear to have a lot of people purchased in congress. An exemption from crime. Well then how very nice indeed.
“…when is congress going to wake up out of their coma…”
Since the industry is supplying the Ambien…um…never?
The auto dealer exemption is absolutely necessary. People need cars to get to work and the dealers need to have a certain amount of…..flexibility to be able to sell cars to people who do not have the best of credit. They should have the ability to peg the interest rates to the amount of credit risk be it 7% or 27%.
The dealers are providing a public service. My brother is such a dealer and does not try to rip people off.
Oh, and since Frank opposed this what does that make him? Some kind of saint?
They should have the ability to peg the interest rates to the amount of credit risk be it 7% or 27%…. My brother is such a dealer and does not try to rip people off.
27% isn’t preying upon people whose credit ratings show that they cannot possibly afford it? 27 fucking percent? What a saint – I tip my hat.
(I paid cash for the hat).
“These cars won’t last long. Heh heh heh.”
Auto loans can be very misleading. My first financing (many years ago!) was an auto loan with a “rule of 78″ interest clause, with no explanation of what that meant. A very sneaky way of getting extra interest out of anyone who wants to pay off the loan early! Without any consumer oversight, auto loans will always have extra tricks to fleece the consumer.
“Buy Here – Pay Here” lots make a fortune. They sell garbage at jacked-upped prices, with huge interest rates, offer no warranties, and when the poor slob can’t make the payments or the car breaks down into the junk that it is, they cash in (again) – possibly twice.
If they can repo the car, the they’re free to sell that same pos to some other poor slob.
Either way, they file a civil suit for the outstanding balance remaining on the entire original contract (whether they re-sell it or not).
So how exactly is this going to protect the consumers from the vultures on Wall Street. It seems this list of exemptions (not even considering the auto loans) makes it pretty difficult to regulate anything. Am I missing something, or is it not exactly these derivatives that are now exempt that caused all the trouble in the first place.
But seriously folks…..
The rule of 78 boils down to this. You pay all the interest (usually at a very high rate) up front. If you have a five year loan and you come into some money and can pay the loan off after the first year, you find you’ve already paid most of the interest for the entire term. At which point it makes no sense to pay off the loan early. If you then calculated the loan on an annual basis for that year it would be….high….very, very high.
I will say this. If Barney Frank opposed this he must not have any independent auto dealers in his district.
Oh, and lets not forget the guys that let you make 47 of 48 payments, and end repo-ing your car if you’re late on payment 48.
This is crap, because Americans will not understand that some of our transactions are protected by the Feds and others are not, while the credit providers will understand very well what’s covered and what’s not.
“Hey, would you like a car with that mortgage?” might be the refrain.
Fixed.
Which is EXACTLY why it’s a total ripoff, they’ve gotten you to pay five years worth interest in one year.
And for those who supported this, it just shows they support ripoff artist more than regular folks. Gee, betting that got unanimous Republican support.
Barney will get what he wants. The opportunity to crow about passing this load of crap that will have very little affect on anything. Oh, he will say he was powerless to do anything about all the amendments that gut the bill. He will be all over MSNBC and CNN telling everyone how great it is that he got something done and any mention of all the exemptions will be met with the following quote: “We weren’t trying to regulate every financial transaction in the country.”
Nice job chairman. You shouldn’t need much of a budget for an agency that doesn’t really regulate much.
Welcome to a preview of health care reform. Lots of big talk and back slapping, but not much actual reform of anything.
This is also a great example of how Republicans are allowed to gut any effective legislation during negotiations, then vote against it as a unified block anyway. There is no downside for this minority party. Anything that gets passed is bound to be a failure and they can say they voted against the crap in the first place.
The biggest dumbasses are the DINO’s that help out with the gutting (the destruction couldn’t happen without them)and then get to explain why they voted for a failed policy. Sort of like making sure your enemy has enough bullets.
All of the Administration’s reform proposals are crap. The CFPA has been defanged. Either the abusive groups have been exempted or as with financial products the CFPA can’t require them to offer a plain vanilla alternative. Another amendment approved yesterday was to give the Office of the Comptroller of the Currency the power to override state regulations if they are tougher than the federal ones. The OCC was the agency which in 2003 barred state attorney generals from going after predatory lenders, making the housing bubble all but inevitable.
As for derivatives, more crap. The exchanges are owned by banks, run by banks, and banks are the major participants. And all the really dangerous ones are precisely those that will be taken off the exchanges.
All of this is just another series of big fat wet kisses to the financial industry. There isn’t a thimbleful of reform in the lot.
Yep, and up next, health care reform.
They’re probably going to have some shit smelling sack of garbage that they’ll call a public option and then slap each other on the back and make speeches about how tough it was and we should be thankful for their hard work.
At least, that’s how I think it’ll come down in the end. Anyone wanna make any wagers otherwise (friendly wagers only, nothing illegal *g*)