Used Car News

Now that President Barack Obama signed the consumer finance bill into law, the hard work begins.

A sprawling new agency needs staffing and hundreds of new rules need writing.
One issue is certain – the new law makes life for dealers much more difficult. The writers of the Senate version made sure of that.
“(The language) essentially condemns auto dealers as a class,” said attorney Michael Benoit.
Benoit and Thomas Buiteweg of Hudson-Cook presented an overview of the new law during a webinar hosted by the National Automotive Finance Association.
Dealers did receive an exemption thanks to an amendment in the House version of the bill. That exemption requires operations to provide service in addition to sales or leasing.
The meaning of the word “service” was left fairly vague. Benoit said regulators will determine if that requires more than basic maintenance.
Some dealership finance business escaped the oversight of the new Consumer Finance Protection Bureau. But the trade-off for that is increased power for the Federal Trade Commission to unfair and deceptive acts and practices.
“It’s possible they could define standard business practices as unfair and deceptive,” Benoit said.
Those practices could include spot deliveries, credit participation and even the sale of some aftermarket products.
The  biggest issue for dealers is the new law could make it harder for finance companies to access the asset-backed securities market. That means less money to finance deals.
Those companies that use ABS for financing may need to disclose more information about the dealers with whom they work.
The government may want to know more about dealer practices in general, Benoit said.
Commentators often refer to the new law as Wall Street reform, but Benoit points out that mom-and-pop mortgage banks really started the crisis.
That means the new Office of Financial Research could take an interest in dealers.
Many new studies will come out of the new law.
One will be about pre-dispute arbitration agreements, Benoit said. These agreements are often cited as a dealer’s best defense against a class-action lawsuit.
Consumer advocates and trial attorneys have pushed for its elimination for years.
“It’s pretty clear where Congress thinks this is going to end up,” Benoit said.
A bigger threat for dealers comes at the state level. Benoit said the new consumer finance law will be the minimum and states can create their own versions with even greater scope.