Financial overhaul pits military against car dealers
Wednesday, May 12, 2010
In the battle to overhaul the nation's financial regulations, a lobbying effort by the world's most powerful military force may have met its match in the local car dealer.
The standoff centers on a proposal by Sen. Sam Brownback (R-Kan.) to exempt most auto lending from new government oversight. The armed forces argue that extra consumer protections are needed because dealerships often employ high-pressure tactics to trap military families into expensive loans.
The dealers counter that regulators already have the power to crack down on such practices and that the new rules would punish honest Main Street businesses for the mistakes of big banks and reckless traders on Wall Street. A vote on Brownback's provision is expected Wednesday.
The campaigns are forcing lawmakers into an uncomfortable choice between the interests of the military and car dealers, who run one of the most influential and deep-pocketed political action committees in Washington and tend to be intimately involved in politics in lawmakers' home districts.
The matter has been the subject of more lobbying than virtually any other aspect of the massive financial-regulation overhaul package pending in the Senate, including an unusual letter from the Pentagon calling for a crackdown on car dealers, some congressional aides said. They added that the arguments from both sides have been emotional, punctuated by visits from ordinary Americans who say their financial well-being is at stake.
On the front lines of the fight are Jan Gaudio, a retired rear admiral from the District, and Michael Martin, owner of Dudley Martin Chevrolet in Manassas.
Gaudio said that last week he visited the offices of a half-dozen moderate senators who might end up deciding the matter. In a tour arranged by consumer advocacy groups, he recounted tales of soldiers who had been baited by dealers into high-interest loans or extra payments. Among those he said he spoke to were aides to John McCain (R-Ariz.), Mary Landrieu (D-La.), Ben Nelson (D-Neb.) and the two moderate GOP senators from Maine, Olympia J. Snowe and Susan Collins.
Martin called his senators in Virginia, James Webb and Mark Warner, both Democrats. He said he argued that consumer groups are unfairly painting dealerships as shady, when many are pillars of their community. Martin said his dealership helps organize Little League and Christmas parades in Prince William County and has been a major financier of area hospitals as well as the Red Cross.
Several legislative aides said the decision-making process has been intense. "We have met with a host of groups that have a stake in the decision. But, for Senator Webb, it's about reaching the right and fair outcome," spokeswoman Jessica Smith said via e-mail, though she would not divulge how the senator will vote.
The regulatory overhaul bill pending in the Senate calls for a new consumer agency that could write rules to protect borrowers and enforce them across a broad spectrum of loans, including mortgages, credit cards and auto loans.
Car dealers say that although they offer financing options to buyers, they largely act as a middleman between lenders and consumers and generally don't lend their own money. Adding rules, such as requiring them to register or submit to regular examinations by federal officials, is likely to lead to a higher cost of doing business, which could be passed on to consumers or discourage dealers from offering financing options altogether.
"This legislation is by far one of the biggest threats to dealerships and consumers," said Bailey Wood, a director of legislative affairs for the National Automobile Dealers Association.