The financial regulation bill nearing a final vote contains a big win for auto dealers. Thanks to hard lobbying and powerful friends in Congress, your next auto loan probably won't be regulated by the soon-to-be-established Consumer Financial Protection Bureau.
Why did they seek the exemption and instead seek to continue being monitored by the Federal Trade Commission?
"The Federal Trade Commission is the devil that we know, and the one we've dealt with before," says Bailey Wood, a spokesman for the National Automobile Dealers Association. "They're definitely preferable to a new agency with an untested track record."
Trying to get a handle on what this meant for consumers, I spoke with Kathleen Day, a spokeswoman from the Center for Responsible Lending on the subject yesterday. Seeing as how the group recently released a study showing auto lenders' sometimes deceptive practices cost consumers billions of dollars a year, she was none too pleased.
"It makes no sense," says Day. "A loan is a loan is a loan, and so all should be subject to commonsense rules. And the car lending industry has a particularly bad record of unfair and deceptive lending practices."
Wood sees it differently.
"Dealers had nothing to do with the Wall Street meltdown. It doesn't make any sense to put Main Street dealerships in a Wall Street reform bill," says Wood. "Unnecessary and burdensome rules which would be promulgated by the Consumer Financial Protection Bureau would make it harder and more expensive for consumers to buy cars."
I've got to differ with Wood here. If the point of regulations were to punish industries, he might have a point. But the point of regulation is to protect consumers, and just because a dealership is in Madison, Wis., instead of on Madison Avenue doesn't mean it's not hurting consumers. Community banks all over the country are going to have to deal with new regulations as well, even though many of them didn't do anything to contribute to the crisis.
Wood is a persuasive and articulate guy, but his language here reveals an attitude to regulation that very much did contribute to the crisis: that regulation is some sort of an unreasonable hassle that should only be foisted on "bad" companies or industries, and that avoiding it is just good business.