Calif. Legislators Seek New Rules for BHPH

SACRAMENTO, Calif. — California State Assembly Member Mike Feuer (D–Los Angeles) and State Sen. Ted W. Lieu (D–Torrance) have proposed legislation that would introduce new rules designed to “rein in abusive practices” of buy here, pay here dealers statewide. The announcements followed a series of articles by Los Angeles Times reporter Ken Bensinger that sought to shed light on used-car lots and the customers who frequent them.

“This industry preys on people who have no other options for getting a car,” Feuer said. “In many parts of our state, auto travel is the only way for parents to get to work on time, or to pick their kids up from school. Instead of helping Californians get back on their feet by providing needed transportation, these dealers are promoting an endless cycle of debt and joblessness.”

Feuer’s bill, AB 1447, would require dealers to display each vehicle’s price on the vehicle itself, prohibit dealers from requiring that customers pay them in person, prohibit dealers from contacting a buyer’s references once a sale is completed, and prohibit them from installing payment assurance devices, including GPS tracking and starter interrupt devices.

A second proposal from Sen. Lieu would require dealer financiers to obtain a California Finance Lender’s license, cap auto loan interest rates at 17.25% and introduce mandatory grace periods for repossessions.

The announcements drew swift condemnation from Kenneth Shilson, founder of the National Alliance of Buy Here, Pay Here Dealers (NABD), who described Feuer’s bill as “the most intrusive proposal I have ever seen.”

“They’re looking to regulate BHPH and disallow payment devices,” Shilson said. “That runs to the perception that the transaction is abusive and the device is an invasion of the consumer’s privacy. It’s not. Lenders have the right to protect their collateral.”

Shilson said Bensinger contacted him about a year before the first article was published. He said he was dismayed to find that the series was “totally one-sided,” focusing on hard-luck stories from BHPH buyers and the high interest rates and multiple repossessions inherent to the segment. The series gave little voice to dealers, Shilson said, noting that high interest rates are a reflection of the risk each dealer is taking on when financing “unbankable” customers.

Last year, at the NABD’s first East Coast dealer conference in Atlanta, Shilson met with a senior member of the newly formed Consumer Financial Protection Bureau (CFPB). The member will be in charge of the agency’s installment lending division and attended the conference on a fact-finding mission.

“He told me that what he took away from the Times series was that BHPH is providing transportation that the government can’t,” Shilson said. “In other words, if you can’t qualify for a traditional loan, we don’t have the public transportation infrastructure to get you to work.”