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Under the Microscope

Word of a recent newspaper article on the world of BHPH dealers had the editor up in arms — well, until he read the story.

December 1, 2011

During a recent visit to my parents’ house, my dad asked me if I had seen an article published in the Los Angeles Times about buy here, pay here dealers. I hadn’t read it and neither had he, but he had recorded a local TV news interview with Ken Bensinger, the reporter who tracked down the story.

I guess I was a little surprised my pops even knew what a BHPH operation was. In fact, he was the one who questioned the reporter’s insinuation during the interview that backing customers into vehicles was a strategy those dealers employed to dupe them.

“Doesn’t this guy know these places have existed for a long time?” he blurted out.

My dad also shook his head when the reporter talked about the high interest rates BHPH customers pay. “I’m not sure what this guy is getting at,” he said.

The reporter then listed off several “tricks” those dealers use to sell cars. That’s when I jumped in, yelling at the TV that we here at the magazine have endorsed those processes because they help dealers manage customer expectations. Heck, if the mortgage industry had employed some of those processes last decade, we probably could have avoided the financial meltdown.

And that’s what upset me: Instead of focusing on the real problem, the interview put processes that have nothing to do with the real issue under the microscope. And unfortunately, it’s TV interviews like that one that snowball into new disclosure laws that do nothing more than add more useless fine print to our retail installment sales contracts. And as I’ve said before, all that fine print does is take the customer’s eye off the ball.

Heck, I’ve fallen into the same trap, spending more time reading lawyer speak than reviewing the list of fees and costs associated with the purchase. And that’s what I hope the people building up the Consumer Financial Protection Bureau  (CFPB) will fix.

You may remember that the architect of that legislation, Elizabeth Warren, said she wanted to remove a lot of that fine print so consumers could focus on what’s really important. And I remain hopeful that that’s what the CFPB will do. Will it happen? Your guess is as good as mine.

Now, for all the things I hated about that TV interview, I have to admit that Bensinger put together one heck of a three-part piece. I do think he fails to understand that the reason Wall Street is paying attention to BHPH is because auto securitizations performed just fine through the credit crisis, but his articles were well researched, and he didn’t shy away from talking to BHPH experts like Ken Shilson, president of the National Alliance of Buy Here, Pay Here Dealers. If you’d like to read it, click here.

Now, that’s not to say you will agree with my assessment of the article. In fact, you could easily argue that Bensinger skipped over the very reason BHPH dealers exist in the first place. Yes, they do provide a service to consumers who are out of options, but I’m not sure that argument is going win over any consumer advocates or regulators.

And for those of you who think Bensinger should have interviewed a car buyer who was able to rebuild his or her credit after working with a BHPH dealer, all I can say is that happy customers tend not to file lawsuits. And that’s what you have to keep in mind, because most of these types of articles start off with an attorney calling the reporter or the reporter traveling down to the courthouse to dig through case files. I know, because that’s what I did when I worked for the Times.

And that’s why I can appreciate Bensinger’s story, even if it does paint the BHPH industry in a not-so favorable light. I mean, how can you defend a dealer who discloses a 12 percent interest rate on the contract while knowingly charging the consumer more than 20 percent? But Bensinger does balance the article out by talking to people like Gustavo “Gus” Camacho, owner of four BHPH lots in California’s Antelope Valley.

I’ve interviewed Camacho myself and I know he represents that segment of the industry well. As for those bad apples mentioned in that story, let’s just say it’s going to get a lot more difficult to fly under the radar. Remember, as the story states, Congress made sure to grant the CFPB authority over BHPH dealers.

So, again, I’m not here to defend those bad dealers; I just want to make sure the spotlight is aimed at the right problem.

Comments

  1. 1. Arroyo, V [ January 12, 2012 @ 01:53PM ]

    Great story!!!!

    Thanks, Mom. -- GREG

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