Elizabeth Warren, the government’s top advocate on consumer financial issues, says that Congress needs to hold auto dealers to the same basic rules of fairness that apply to other financial institutions.
“Why it is that some will have to follow the basic rules of fairness in making the price clear and making the risk clear, and some kind of credit lenders won’t have to follow those same rules?” Warren said in a visit to the Center for Public Integrity newsroom on Monday.
But advocating for such changes isn’t a priority of the new Consumer Financial Protection Bureau (CFPB), she said.
Warren, a Harvard Law School professor and long-time consumer advocate, is its effective head until a director is nominated and confirmed by the Senate. The agency, which will have broad authority to write new regulations and enforce consumer protection law, is her brainchild.
It’s not yet clear whether President Barack Obama will appoint Warren, whose nomination would likely to be opposed by Senate Republicans, as head of the agency. She is currently an assistant to the president and a special adviser to Treasury Secretary Tim Geithner.
The Dodd-Frank financial regulation law exempts auto dealers from oversight by the CFPB. A Center investigation of auto dealer practices last June revealed a culture in which forged documents, hidden fees, and other questionable practices are tools of the trade.
Former insiders described practices that mirror some of the tactics that gave the mortgage industry a bad name and prompted advocates like Warren to push for the creation of the CFPB. These practices include unapproved charges and fees slipped into loan documents, interest rates jacked up without customer knowledge, and forged signatures.
Car dealers arrange the financing for what for many Americans is their largest or second-largest financial obligation. Despite a pattern of abuses, the industry, which is increasingly led by an array of Wall Street-traded “megadealer” chains, mostly got a free pass from stepped-up federal oversight.
Warren noted that about 20 percent of auto loans, those issued by banks or credit unions, fall under the bureau’s purview, and thus are subject to regulation.
While acknowledging the carve out, Warren said that the Dodd-Frank law gives her agency “almost all we need” to protect consumer interests when it officially opens for business in July. “We have plenty to do and that’s what we are trying to focus on,” she said.