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States Continue Efforts to Limit Finance Profits

March 28, 2005

A Maryland bill that would have imposed a 1.5 percent cap on interest rate markups was rejected by state lawmakers March 21. But other states are still pushing to restrict these profits.

In California, lawmakers are considering legislation that would cap markups at 2.5 percent, reported Automotive News. The state also has a proposed ballot initiative that would limit finance profits to $150 per transaction.

The Texas Office of Consumer Credit now recommends that dealerships disclose to customers that interest rates are negotiable and that the dealership may make money on the rate.

The bill rejected in Maryland would have required dealerships to make written disclosures on a separate form, including the customer's credit score and the interest rate markup.

Under the Maryland Motor Vehicle Financing Disclosure Act, dealerships would have had to tell customers that they may be able to get a lower interest rate from another lender. Dealerships would have had the option of charging a $150 processing fee in lieu of the 1.5 percent markup, according to the paper's report.

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