Are you being ripped off by car loans?
Elizabeth Warren Takes on Big Auto Single Handedly
01 June 15
No fellow Democrats on the Senate Banking Committee have yet agreed to co-sponsor the legislation.
lizabeth Warren is ready to go to battle against her latest foe — auto dealers.
Only problem — no one has rushed in to join her.
Warren, the fist-pumping, bank-bashing, Obama-needling senator from Massachusetts, has a reputation as a polarizing force. But her desire to take on a sacred cow has her in an unusually isolated position.
Warren has spent the past six weeks calling for stronger government oversight of dealers’ loans to car buyers, which are often the largest kind of unregulated debt consumers have. She is now trying to drum up support for a measure to bring lending at dealerships under the control of the Consumer Financial Protection Bureau.
None of Warren’s fellow Democrats on the Senate Banking Committee have agreed to co-sponsor the legislation yet, several industry and congressional sources confirmed for POLITICO.
Warren has approached Sens. Chuck Schumer, Mark Warner, Heidi Heitkamp and possibly others, the sources said.
Schumer said recently he was “looking at” the issue. His office didn’t respond to additional requests for comment.
Warner and Heitkamp are even less enthusiastic, sources said.
The reason isn’t complicated. The $730 billion auto-dealer industry enjoys a special status. Auto dealers are in every district, employ more than a million people and are often local and family owned — which adds up to huge leverage in Washington. The industry has an army of lobbyists and a long history of beating back regulatory attempts.
Lobbying groups for auto dealers disagree that they need more oversight. They say they feel pretty confident Warren’s efforts to regulate dealer lending will go nowhere.
“This was settled five years ago by a broad bipartisan consensus in both the House and Senate, so it’s not surprising that there’s virtually no interest in Congress for relitigating Dodd-Frank, particularly when there’s no substantive rationale for doing so,” said Jared Allen, spokesman for the National Auto Dealers Association.
To be sure, it’s early in the process for Warren. Her style has been to research and talk with fellow lawmakers over as many as six months before filing any new legislation. And even if she gets nobody from the committee, she could woo a more progressive Senate Democrat not serving on the banking panel or file the bill without a co-sponsor. Warren’s office declined to comment.
As an industry, auto dealers have always held outsized sway over Congress. Despite the massive bailouts for General Motors and Chrysler, the dealers were one of the few industries that managed to get their financial products a free pass from the consumer agency when lawmakers were creating it in the aftermath of the financial crisis. Back in late 2009 and 2010, many Democrats serving on the House Financial Services Committee and in the Senate sided with Republicans to keep loans made at dealerships off limits from regulation. (The agency can regulate car loans not made at dealerships.)
Nearly every congressional district has a major auto dealership, owned and run by longtime independent businesses who can be counted on during election time. During the 2014 election cycle, car sellers gave about $10 million to lawmakers running for the House and Senate, most of it directly from individuals affiliated with dealerships, according to data analyzed by the Center for Responsive Politics.
“These are businesses that have been around for many generations and tend to be large employers in the community, and family owned and operated,” said Aaron Klein, director of the Financial Regulatory Reform Initiative at the Bipartisan Policy Center, who supports Warren’s move. Klein argues that the auto loans made at their offices should be treated the same way as those made at credit unions and banks. “There ought to be one set of rules for these loans, whether they’re made by a bank or a nonbank, since the assets eventually find their way into the banking system.”
Warren began to talk about auto-dealer lending in an April 15 speech to economists, when she first compared the loans to the “pre-crisis housing market, with good actors and bad actors mixed together.” She called auto-dealer loans the “most troubled” consumer financial product and said they should never have been carved out of increased oversight.
“While the CFPB has oversight for mortgages and credit cards and checking accounts, it doesn’t have complete oversight of the auto loan market because Dodd-Frank specifically carved out auto dealers,” Warren said in a separate speech on May 5 at the Institute for New Economic Thinking Finance and Society Conference. “We need to fix that by giving the consumer agency the power to supervise the market for auto loans.”
Her office then began approaching other lawmakers’ offices, as with other bills she’s filed in the past.
One of those approached was Warner, sources tell POLITICO.
When asked about her bill a few weeks ago, Warner said he hasn’t “re-reviewed” the idea, since the idea surfaced during the drafting of Dodd-Frank.
“I know there has been some concerns on both sides,” he said. Warner’s office did not respond to requests for comment this week.
Heitkamp was also approached, sources said. Her office also declined to comment.
In the meantime, auto dealers are approaching some of the same Democrats, hoping they’ll support legislation that would make it more difficult for the CFPB to warn auto dealers to be careful when setting interest rates on car-financing packages, as the agency did in 2013.
The agency told car sellers to watch out for laws on the books that ensure consumers are treated fairly, warning that the practice of cutting interest rates for some consumers can create “significant risk that will result in pricing disparities on the basis of race, national origin, and potentially other prohibited bases.” A House bill, sponsored by Colorado Democrat Rep. Ed Perlmutter and New Hampshire Republican Rep. Frank Guinta, would repeal the agency’s 2013 warning guidance and force the agency to collect comment before issuing that kind of guidance again.