Auto dealers granted special exemption from Dodd-Frank based on lies

Auto dealers are directly responsible for writing up the lion’s share of the $850 billion auto lending market. Like home mortgages, most of those loans are then packaged, securitized and sold on Wall Street to investors — spreading the risk around. New and used car dealers are also the leading source of consumer complaints to state and local consumer protection agencies and the Better Business Bureau.  They played a major role in the collapse of the economy and the recession.

Despite years of being warned by economic analysts that their predatory practices were a “house of cards” that would inevitably collapse, they failed to rein in their abuses. Instead, their practices went from bad to worse — including falsifying loan applications and forging signatures on documents, and selling cars they didn’t even own — massively defrauding the public, banks, and other dealerships.

So why aren’t they regulated under the Dodd-Frank Wall Street Reform Act?

Simple. It’s because they were granted a special exemption, by Congress. The claim that dealers made, to rationalize this special treatment, was that auto dealers are supposedly “Main Street, not Wall Street.” This talking point became their oft-repeated refrain with members of Congress and the press.  Never mind that it was laughably false.

Former U.S. Senator Sam Brownback (R-Kansas) presented the amendment to give the special exemption from Dodd-Frank to auto dealers, on the Senate Floor. Not surprisingly, he merely mouthed the car dealer line about their not being part of Wall Street.  He claimed that car dealers

“are the quintessential Main Street business throughout the country. There’s not a single auto dealer on Wall Street. None of them. Not a one. You can go up there today and try to buy a car and you can’t get one. These are Main Street businesses.”

Too bad what Sen. Brownback told his Senate colleagues was totally false.  A simple check of readily available public filings would have revealed that actually over 1,000 dealerships are owned by huge automotive dealership chains that are indeed traded on Wall Street.

Exhibit A: the behemoth AutoNation, based in Florida, which owns more than 215 dealerships, and took in over $13 billion during 2011. Bill Gates is one of the major investors who owns shares of AutoNation. Hardly most people’s idea of Main Street.

Here’s a link to Brownback’s floor speech, recorded by C-Span and posted on the U.S. Senate website. Sen. Brownback’s speech appears approximately 2 hours and 53 minutes after the recording starts:

May 24, 2010 Floor Debate over Dodd-Frank Wall Street Reform Act

Reality check:  Among the leading auto dealership chains that are publicly traded on Wall Street (revenue based on figures from Automotive News, March 12, 2012 — for the year 2011):

AutoNation — 215 dealerships, over $13 billion in revenue

AutoNation’s filings with the Securities and Exchange Commission

Penske Automotive Group — 145 dealerships, over $11 billion in revenue

Penke’s filings with the SEC

Sonic Automotive — 119 dealerships, over $7 billion in revenue

Sonic’s filings with the SEC

Asbury Automotive Group — 79 dealerships, over $4 billion in revenue

Asbury’s filings with SEC

Apparently Sen. Brownback was so gullible, he believed what the auto dealers told him and fell for their line about being Main Street, not Wall Street, without bothering to check the facts.  You can draw your own conclusions about his intelligence, or motives. Let’s just say that if you’re buying a car, he’s probably not someone you would want to ask for advice on how to get a good deal.

So — if you’re ripped off by an auto dealer, who would otherwise be policed by the new Consumer Financial Protection Bureau, created under Dodd-Frank, who do you have to blame?  Well, the dealer, of course. Plus former Sen. Brownback, who is now the Republican Governor of Kansas. Plus all the members of Congress who failed to stand up to the auto dealer lobby, whether because they were so ignorant about the business, or gullible, or just plain corrupted by auto dealer cash. Interestingly, all the Republicans voted to exempt the car dealers, who are among their biggest sources of campaign cash. Most Democrats voted against the exemption, which was opposed personally by President Obama.

And if you’re ripped off by an AutoNation dealership, you can blame one of their largest shareholders, who profits from their billions in revenue — Bill Gates.

Dealers sell stolen cars

When you buy a car from a dealership, you don’t expect to end up with a “hot” car that was reported stolen. But — some dealers have been selling stolen cars to unsuspecting consumers. Worse, when the cars were seized by police, the dealers refused to give the consumers a refund.

A Florida woman bought a car from a large franchised auto dealer. Imagine her shock when police showed up at her home and seized the vehicle. They told her it was stolen property. She showed them the contract and other documents. She had even registered it in her name and paid for major, expensive repairs.

However, that didn’t matter — she still lost her car. When she contacted the dealer who sold her the car, he refused to accept any responsibility.

Eventually, she got an attorney and sued, but years later she was still trying to get a refund, while the dealer kept stonewalling.

Recently, a news team in Sacramento contacted CARS about a similar case. The insurance company had paid off the claim on the stolen car, and took possession when it was recovered — from a hapless car buyer, who had a receipt to prove she had bought it from a local dealer. Suddenly she was without her car, and she lost all the payments she had made.

You may think that when you buy a car from a licensed dealership that you’re protected. Unfortunately, when stolen property is involved, often the dealers and insurers come out ahead, leaving innocent consumers in the lurch.

A Texas man was arrested by Mexican authorities after the vehicle he bought from a dealership in Texas was identified as stolen, after he drove it into Mexico and attempted to return home.  He was eventually cleared of auto theft charges. But the dealership balked at paying him back for the stolen car.

Some consumers are victims of a sophisticated scam known as “VIN-switching” or “vehicle identity theft.” Thieves switch the VIN plates or alter them. According to the FBI, VIN switching is a serious — and all-too common — crime.

Bottom line for car buyers: Always insist on seeing the title to the car before you buy. Make sure the name on the title matches the seller’s name. Make sure the VIN on the car is the same as on the title. Double-check with the motor vehicle department in your state to confirm that the owner has proper title to a car with that VIN.

Read more: FBI — suspect sentenced for VIN switching

Texas man says dealer sold him stolen car

Buyer Beware: Flood cars from states hit by Hurricane Sandy

WARNING!!

Tens of thousands of flood cars that have been submerged in salt water, and contaminated by bacteria and various toxins, will soon start to appear all over the country, even in states far from the center of the storm.  Flood cars are inherently unsafe, and pose a serious risk to anyone who drives them, rides in them, or even just comes into contact with them.

Flood cars are basically rotting from the inside out. The electronic / computer systems, which control everything including the brakes, engine, air bags, and other major safety systems, are hopelessly compromised and will inevitably corrode and fail, over time.

Bacteria, mold, and other contaminants can cause serious or fatal health problems, particularly among children and adults with asthma and people with allergies or compromised immune systems.

Tips for consumers — how to avoid flood car scams:

  • Be on the lookout for both new and used cars with tell-tale signs of having been submerged — musty smell or “over-perfumed,” silt in places like under carpeting, in the well where the spare is stored, or title histories indicating the car was in the flood area

 

  • Check federal database of total loss carsprior to purchase (this is the official website for the National Motor Vehicle Title Information System, established by the US Dept. of Justice, where insurers, self-insured entities, salvage pools (auctions), and junkyards in all 50 states MUST report all total loss vehicles, within 30 days — many report daily)

 

  • If the vehicle is relatively new, or still within the factory warranty period, get the VIN number and call the manufacturer to ask if they will honor the warranty — if it’s a flood car, they won’t honor the warranty, even if it’s new. Insist on getting confirmation in writing that the manufacturer will honor the warranty, before you buy.

 

  • Keep in mind that a “clean” title is not an indication the car is OK — many cars have had the titles “washed” to remove the “flood” car brand, and many states don’t even have a “flood” car designation. Plus some insurers have admitted routinely failing to properly brand titles — increasing the price the car can command at auction, by making it easier for unscrupulous sellers to hide the car’s checkered past.  This is one reason NMVTIS is so valuable for consumers — total loss vehicles MUST be reported to NMVTIS, even if the titles have never been branded, or if they have been “washed.”

 

  • Get any car inspected by a trustworthy auto technician — for example, one who gets consistently high ratings in Car Talk’s Mechanics Files — before you buy

 

  • Test drive the car before you buy — be watchful for signs the car is hesitating, running rough, smells musty, has tell-tale signs of silt or premature rust in places where you wouldn’t expect to see rust

 

NEVER, EVER buy a car sight unseen, without an inspection and test drive. If you are interested in a car you found over the internet, buy locally and go check it out in person, in a safe, public place, during daylight hours.  It the seller claims they are the owner, make sure they show you the work orders from the repairs they had performed, and confirm the name on the work orders matches the name on the registration and title.