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And I'm Renee Montagne. One more big overhaul effort lands on the floor of the House today. This one is aimed at revamping the country's financial system. Debate is expected to begin on rules to regulate everything from complex derivatives to home mortgages. The bill is generally supported by consumer groups. One thing they don't like is an exemption won by auto dealers. NPR's John Ydstie explains.
JOHN YDSTIE: Auto lending is a huge business. In the world of consumer finance, it's surpassed only by home mortgages. Under the original bill, it would've been regulated by the new Consumer Financial Protection Agency. But the auto dealers won an exemption in committee in an amendment proposed by California Republican John Campbell, a former auto dealer himself. Campbell argued that in most cases, dealers are just helping consumers arrange financing with banks. They're just passive intermediaries, he says.
JOHN CAMPBELL: Somebody simply in the middle saying, all right, here's these people who will loan you, customer, money. But they're not actually loaning the money.
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ROSEMARY SHAHAN: Auto dealers are very active players.
YDSTIE: Rosemary Shahan is a longtime auto industry critic and consumer advocate.
SHAHAN: They have a huge influence over the kind of loan most that people get when they buy a car.
YDSTIE: In about 80 percent of auto sales, car dealers are not lending their own money. They're arranging loans for their customers with banks or finance companies. But the transaction is a huge profit center for dealers, and there are lots of ways for dealers to make money in the process, says Shahan.
SHAHAN: You fill out a credit application and a dealer submits it to a lender. And what they're not telling you is they get a kickback in exchange for raising the interest rate on your loan.
YDSTIE: Michael Harrington, chief lobbyist for the National Automobile Dealers Association, says there's no need for the proposed Consumer Financial Protection Agency to oversee auto financing because it's already regulated by the states, the Federal Reserve and the Federal Trade Commission.
MICHAEL HARRINGTON: Less than 1 percent of the complaints to the FTC were auto- related, so it's really a solution in search of a problem.
YDSTIE: But David Vladeck, director of consumer protection for the FTC, disagrees.
DAVID VLADECK: Most people who have bought a car that they're having a problem with complain to either their state attorney general or their county or city consumer protection authority. So the fact that we see only a small fraction of the complaints doesn't mean that this is an area that shouldn't be regulated also by the federal government.
YDSTIE: Raj Date, a former banking and Wall Street professional who specialized in auto financing, says exempting auto dealers from oversight by the proposed new agency is bad policy.
RAJ DATE: It's an astonishingly bad idea, frankly.
YDSTIE: Date now runs a think-tank focused on financial services policy. He recently published a report outlining the lack of transparency in auto financing.
DATE: What the exemption would do is it would protect auto dealers on the back of middle-income borrowers. It is a curiously regressive way of providing a bit of corporate welfare to a favored political interest.
YDSTIE: John Ydstie, NPR News, Washington.
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