SALEM, Ore. — The National Independent Automobile Dealers Association (NIADA), along with its newly-formed Buy-Here, Pay-Here Commission and the Oregon Independent Automobile Dealers Association (OIADA), are calling on dealers to take on a bill that would change how buy-here, pay-here dealers operate in the state.
Senate Bill 276, which is currently pending before the Senate Business and Transportation Committee, would require BHPH dealers to obtain the same license from the Department of Consumer and Business Services (DCBS) as payday or auto title lenders, among other requirements.
“They are trying to put buy-here, pay-here dealers into the same framework as a payday lender or an auto title lender and the license structure that exists,” NIADA regulatory counsel Shaun Petersen told Auto Dealer Monthly. “They are trying to shove this square peg into a circle hole, and that's just not what buy-here, pay-here dealers do. They are not offering a loan; they are offering a purchase-money contract. And it's a completely apples to oranges comparison.”
This misunderstanding of how BHPH dealers do business extends to other provisions in the bill, Petersen said, including a proposed rate cap that would cap interest rates at no more than 20%, or the federal funds rate plus 17% — whichever is lower. Because customers of BHPH dealers are inherently higher risk, a cap could affect some consumers’ ability to get financing.
“If you are capping a rate at a particular point, then the risk may become too great for that buy-here, pay-here dealer to lend to that particular consumer,” Petersen explained. “The way that they have these rate caps drafted in the bill, we're concerned that you're going to eliminate the ability for some of these dealers to get loans to the higher-risk consumers; the ones that need the vehicles and can't get financed in any other place.”
The same concern extends to the bill’s proposed ban of GPS and starter-interrupt devices, which BHPH dealers use to locate and shut down vehicles of customers who are behind in their payments. “Since [dealers] are able to locate the collateral if something goes wrong, customers can end up getting into better deals because there's lower risk,” the NIADA's regulatory counsel noted.
The bill would also reduce interest rates to account for the amount of a customer’s down payment, cap repossession fees at 7.5% of the purchase price and hold contracts to underwriting standards passed by the DCBS. It would also restrict the ability of a dealer to repossess a vehicle until after 30 days from when the customer failed to make a payment, something Petersen said makes little sense for the industry. “A lot of buy-here, pay-here deals are structured with weekly installments or biweekly installments,” he said. “So if a customer is in a weekly situation, they are four installment payments behind by the time the dealer is able to repossess the car.”
Since the legislation’s introduction earlier this year, Petersen has worked alongside Shawn Miller, a longtime industry advocate in Oregon hired by the NIADA, to contact legislators and policy staff of DCBS about the bill’s potential impact on consumers and BHPH dealerships.
“Basically, this bill is wholly unworkable for the industry,” Petersen said.