WASHINGTON — A legislative proposal heard this
week by a U.S. House of Representatives subcommittee directs the Federal Trade
Commission (FTC) to issue new rules that would have significant ramifications
for the auto finance industry, says the chief federal government affairs
official for the American Financial Services Association (AFSA).
The Consumer Credit and Debt Protection Act (H.R.2309) would
authorize the
FTC to consider adopting rules to restrict post-sale changes in
auto financing terms, implement a right to rescission requirement for auto
transactions, and limit auto dealer compensation based on “the interest rate,
annual percentage rate or the amount financed” in connection with the dealer
arranging for financing or the sale of the contract. AFSA submitted testimony
on the bill as part of a May 12 hearing held by the House Energy and Commerce
Consumer Protection Subcommittee.
“In all likelihood, much
of the legislation, as currently drafted, will burden consumers, rather than
help them,” said AFSA
executive vice president Bill Himpler. For example, a right to rescission
requirement could mean a consumer waits for three days before picking up a
vehicle to avoid titling issues.
“People may not be happy
if they cannot drive home in their new car, especially if they traded in their
previous one,” Himpler said.
In its testimony, AFSA
pointed out that an overly broad restriction on post-sale changes in financing
terms could affect a financial institution’s ability to provide payment
schedule modifications or extensions for customers experiencing financial
difficulty.
A limitation on dealer
compensation “could have the unintended consequence of eliminating the finance
and insurance office in the dealership, thus destroying the indirect financing
model, which is a major source of financing for consumers,” stated AFSA. The association’s full testimony can be found here.
In addition to directing
the FTC to issue auto-related rules, H.R.2309 would give the agency expedited
rulemaking authority and the ability to obtain civil penalties in connection
with unfair and deceptive acts or practices. A copy of the bill, sponsored by
Representative Bobby Rush (D-IL), can be found here.
