CHICAGO—The Illinois legislature is considering two measures that force dealers to share their loan interest-rate markups. The bills aim to help consumers by encouraging dealers to use flat fees over variable interest rates. Dealers said such legislation would significantly cut into their profits, according to Automotive News.

Dealers would have to disclose the buy rate, or wholesale interest rate, and the retail rate. These disclosures would empower customers to insist on financing at the buy rate. Dealer profits would shrink. Also, lenders might be compelled to replace markups with a flat fee, which is a fixed amount lenders pay to dealers who offer customers the buy rate.

Gene Duff, finance manager of Joyce Ford in Chicago, said his commission is 10 percent of the dealership’s finance profit. If he used flat fees, which are usually $100 to $150 a loan, he would make a mere $10 to $15 on each loan.

But some lenders, compelled by the legislation and bad press about interest-rate markups, are increasing flat fees to make them more attractive. Still, many dealers say they oppose the bill because they’re being unfairly targeted.

The Chicago Automobile Trade Association, on behalf of dealers, is trying to negotiate with legislators for more reasonable disclosures, said spokesman Paul Brian. The association would approve of disclosures informing customers that the dealership profits from financing and that interest rates are negotiable, said Automotive News.

If the legislation passes, Illinois would become the first state to require rate-markup disclosure. Other states could soon follow.