Abuses Continue To Plague Auto Financing Industry, Hurt Consumers
FTC hosts second roundtable to gather information on possible consumer protections
Center for Responsible Lending
July 27, 2011
Over 38 million vehicles were financed through an auto dealer last year, with many loaded with abusive lending practices that cost Americans billions of dollars. Auto dealers often steer unsuspecting buyers into overpriced loans, especially when kickbacks from the bank to the dealer are involved. Until now such practices have continued largely unknown to consumers and unregulated, but new consumer protection laws have changed that by giving the FTC new oversight authority.
In its new role, the FTC is holding fact-gathering sessions around the country. It will hold its second one, open to the public, August 2nd and 3rd in San Antonio. This session will focus on military consumers, financial literacy, and fair lending practices. The FTC wants to hear in advance from consumers about their buying experiences. To comment and to learn more visit: http://www.ftc.gov/bcp/workshops/motorvehicles.
Buying a car is among the most expensive transactions many consumers will make. Dealership financing can be convenient, but for many, especially those without other options, it opens the door to abuse because it’s complicated, opaque, and often subjective. In the case of interest rate markups, it adds an estimated $25.8 billion to the cost of car loans, raising the chance of default and repossession, especially among subprime borrowers.
For military families these abuses are damaging and frequent. A report by the National Consumer Law Center─In Harm’s Way At Home: Consumer Scams and the Direct Targeting of America’s Military and Veterans─ found that clusters of predatory lenders, including those offering high-cost auto loans, exist near every U.S. military base. Such concentration has spurred a number of stories from military personnel, including one from Staff Sgt. Kevin White and his wife, Linda, of Murietta, CA, who were offered a loan by a dealer near Camp Pendleton at a 23% APR, even though they had been approved for a 6.9% APR loan by their credit union. And the stories from five soldiers from Fort Riley, KS., who were forced to pay extra for add-ons that weren't even on their cars—leather upholstery, high-end stereos, anti-theft systems, upgraded wheels, power sunroofs.
The Center for Responsible Lending, the National Consumer Law Center , the National Association of Consumer Advocates and Consumers for Auto Reliability and Safety urge the FTC and other federal agencies to examine unfair practices in the auto lending industry. For more information contact Cesar Castro, (919) 313-8537, firstname.lastname@example.org; Delicia Reynolds, (202) 452-1989 ext 103, email@example.com; Jan Kruse, (617) 542-8010, firstname.lastname@example.org, or Rosemary Shahan at (530) 759-9440, email@example.com.
About the Center for Responsible Lending
The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation's largest community development financial institutions.