On Sunday, I wrote about the Federal Trade Commission's fact-finding mission into the consumer experience of buying, leasing and financing a car. The FTC is trying to decide whether current consumer protections are enough, or whether more regulations and customer education are needed.
Steven Eisenberg, a business manager with Arena Motor Group in Owings Mills, called to say that the dealer's side of the story is often overlooked in articles about buying a car. I told him I would post his comments on the blog.
"Considering that car dealers are already regulated by the FTC, state laws and regulations and State Motor Vehicle Administrations (who, by the way license car dealers) and Banking regulators, that certainly seems to be "overkill" or, at the very least, about politicians who want their names in newspapers. Let me give you some examples:
1. On every sale, car dealers are required to do an "OFAC" check. BTW, OFAC stands for Office of Foreign Asset Control. It checks to see if the buyer is on any government watch lists.
2. Car dealers (again under Federal rule) follow a "Red Flags" regulation for identity protection. The dealer has to actually create a Red Flags Manual that outlines every process the dealer has undertaken to prevent identity theft.
3. As a change in the FTC's Fair Credit Reporting Act, the dealer know has to provide everyone who submits a credit application, with a copy of their credit score.
4. Dealer's are required to send an "Adverse Action Letter" to every person, on who's behalf the dealer submitted an application (for a loan to buy a vehicle) to a lender or lender's if the loan was declined. And, that's on top of the requirement that the lender sends the same letter to the applicant. TALK ABOUT OVERKILL."
He says all industries have "a few bad apples," and those in the auto industry — which is on track to sell 14 million new vehicles this year — are so few to be "mathematically insignificant."
For car buyers with less than perfect credit, here is a advice from Eisenberg worth noting. Consumer advocates have complained of "yo-yo financing," where the buyer leaves the dealership thinking the loan is approved only to be told later that financing fell through. The buyer then is given another loan with less favorable terms.
Writes Eisenberg: "The remedy is very simple. To begin with, and as you mentioned, Maryland already has rules and regulations that should prevent this. If it doesn't, the customer should refuse to return the vehicle and make the dealer live up to the original loan."
He also writes about the role of the auto industry in the economy:
"To begin with, one in every twelve people in the USA, are, in some fashion, tied to and dependent on the auto industry for their livelihood. And, that does not even include how dependent the Federal & State Governments budgets are on the auto industry. Maryland collects sales taxes, property taxes and income taxes from each and every car dealer in our state. And, now is going to raise gasoline taxes. Imagine what would happen if there were no car dealers to pay these taxes. The Fed's do the same thing… Everybody depends on the auto industry."