Page 2 of 2   <      

Financial overhaul pits military against car dealers

Financing concerns

Dealerships also sell their loan contracts to financial firms -- a source of revenue that consumer advocates say is just as important as the money made from selling cars. For this reason, the consumer groups say, it's unlikely dealerships would stop offering financing to consumers.

Lawyers who defend soldiers against car dealers in lawsuits say they have seen auto loans with rates as high as 25 percent, as well as other harmful practices.

Army Spec. Martin Garcia said that in 2009 he tried to buy a used Dodge Neon from a dealership outside his base at Foot Hood, Tex. He paid $12,000 for the car, putting $2,000 down.

A few days later, the dealer asked him to return to the lot. The managers then informed Garcia that he had to pay another $2,000 because his loan contract was not approved by the lender. Meanwhile, he said, an employee of the dealer parked a car to block the Neon from leaving the lot. Garcia handed over the keys and had to arrange other transportation. He said the dealer sold his car the next day to another customer and kept Garcia's down payment.

Garcia said he filed a lawsuit to try to recover the money.

It is unclear whether the exemption for car dealers has enough votes to pass. The Obama administration has strongly opposed carve-outs for any industry.

Brownback recently introduced another amendment that would exempt dealers who sell boats and recreational vehicles -- an effort to garner support from senators in states such as Rhode Island and Florida, where such businesses have large operations.

The House version of the bill, which passed in December, includes a dealership exemption, proposed by Rep. John Campbell (R-Calif.), a former auto dealer. The amendment garnered bipartisan support in committee, with 19 Democrats backing it despite opposition from the Obama administration.

<       2

© 2010 The Washington Post Company