WASHINGTON – In the end, the political clout of 18,000 auto dealers scattered nationwide was too much even for President Barack Obama.
House and Senate negotiators putting final shape to a sweeping overhaul of Wall Street regulations all but agreed Tuesday to exclude auto dealers from the oversight of a consumer financial protection bureau.
“The political reality is that those of us who have fought against an auto dealer carve-out can’t prevail,” said Rep. Luis Gutierrez, D-Ill.
The House bill approved last December contained an exemption for auto dealers, among others, from lending regulations issued by the proposed consumer agency. The Senate did not, but the sentiment was there. In a 60-30 nonbinding vote last month, senators called for the auto dealer loophole.
Under a compromise offered by Senate Democrats on Tuesday, auto dealers would still be covered by federal truth-in-lending rules that would have to conform to regulations adopted by the consumer agency.
The Federal Reserve, which oversees truth-in-lending regulations, could adopt different rules but would have to explain its decision. At the same time, the Federal Trade Commission would be given authority to write new rules for auto dealers under accelerated procedures.
But the bottom line would be that auto dealers would be exempt from direct supervision by the consumer financial protection bureau. The exclusion would not apply to auto dealers that provide their own financing, such as Carmax, or to giant auto lender GMAC.
The Senate did reject a House proposal to exclude pawnbrokers and employee benefit and compensation plans from the consumer bureau’s oversight.
But it also rejected a House proposal to place such financial businesses that are not banks, such as payday lenders and check cashing agencies, under consumer bureau enforcement. The Senate version would require the consumer agency to write rules for those firms, but enforcement would be left to states and the Federal Trade Commission.
Senate Banking Committee Chairman Chris Dodd, who is shepherding the Senate version of the bill, said he didn’t care for the loopholes but that he had to accommodate the political interests of senators.
“If I wrote the bill on my own it would cover all of these guys,” he said.