The Durham-based Center for Responsible Lending is backing House legislation that targets what the group calls predatory lending practices by some North Carolina auto dealers who finance their customers' loans.
"This is taking advantage of car buyers in the worst way, along with taking their hard-earned money each and every payment," Chris Kukla, lobbyist for the Center for Responsible Lending, said in a press release. "What's worse is car dealers are not even required to disclose marked up interest rates to buyers under state law."
In a report called "Car Trouble" published Thursday, the group describes practices it calls dealer kickbacks, loan packing and "yo-yo scams," Bruce Siceloff reports.
Rep. Dan Blue of Wake County has sponsored a bill aimed at the practices, while auto dealers said the report was misleading.
More after the jump.
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Blue's bill, which will be discussed next week in the House Commerce Committee, would require dealers to give buyers more detailed information about the separate prices of add-on items included in loan packages.
It would make it easier for buyers to cancel a sale before it is final, and it would bar dealers from getting kickbacks from lenders based on the loan interest rate.
Robert Glaser, president of the N.C. Automobile Dealers Association, called the center's report "horribly misleading" and Blue’s bill unfair to a struggling industry.
"It's a horrible time in the industry to all of a sudden be picking on the car dealer and say this is a kickback, which makes it sound illegal," Glaser said in an interview. "In every dealership a sign is posted, and consumers know this, that says the dealer may be compensated for arranging financing."
Glaser said consumers are always welcome to finance their cars independently, but dealers often get them better loan rates "because of the dealer’s relationships with the lenders."
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Re: Report: Dealers' loans predatory
Dealers hardly make money on the car itself anymore, but rather the debt associated with the car. That's why there's more innovation in finding ways to rack up your debt (and their commission), than to make a better and more fuel-efficient car. No wonder Chrysler is bankrupt! That's why this legislation makes perfect sense to level the playing field for the little guy.