Senate backs car dealers on consumer rules
May act to exclude some of them from new regulations
WASHINGTON — In a rare defeat for President Obama, the Senate called yesterday for auto dealers to be excluded from the regulations of a proposed consumer financial protection bureau.
The nonbinding 60-to-30 vote provides direction to lawmakers as they assemble broad Senate and House bills setting new, sweeping controls on Wall Street. The Senate passed its bill last week; the House acted in December.
The House bill already includes an exemption for auto dealers. While the Senate bill does not include such an exclusion, yesterday’s vote gives auto dealers an extra measure of leverage to avoid the reach of a consumer entity.
Obama has argued forcefully against diluting the bill’s consumer provisions. The administration has enlisted the help of the Pentagon, which maintains that soldiers are especially prone to car loan schemes, and Obama himself spoke out against the exclusion last week.
Auto dealers say they only process the loans and then turn them over to other lending institutions for them to administer and service. The exclusion would not apply to auto dealers that provide their own financing, such as Carmax, or to giant auto lender GMAC.
“There’s not a single auto dealer on Wall Street,’’ said Senator Sam Brownback, a Kansas Republican and the leading sponsor of the exclusion. “These are Main Street businesses and they took it on the chin last year.’’
Senator Chris Dodd of Connecticut, chairman of the Senate Banking Committee, argued that auto dealers, like community banks and other institutions that assemble mortgages and other loans, should fall under the agency’s oversight.
“The second-largest purchase that most Americans make is the purchase of an automobile,’’ he said. “We buy a home and we buy an automobile, and they are expensive. . . . We’re trying to protect people.’’
The Senate vote was not as significant as if the auto dealer exclusion had passed as an amendment to the Senate bill. But the vote was strongly bipartisan, with 21 Democrats voting in its favor.
The auto dealers, powerful figures in their local communities, have argued that they are simply intermediaries who originate the loans for other lenders to service and administer.
Auto dealers may well have more clout than automakers on Capitol Hill; while automotive factories are scattered around the country, it’s hard to imagine a House member without a car dealership in his or her district.
Car dealers made at least $3 million in campaign donations at the federal level this election cycle, with more than two-thirds going to Republicans.
In the 2008 election, they gave at least $11.9 million, steering more than three-quarters to the GOP, according to data compiled by the nonpartisan Center for Responsive Politics. Automakers, by comparison, gave $2.6 million in the 2008 election, split almost evenly between Democrats and Republicans, and at least $340,000 this election cycle, with 58 percent going to Democrats.