Legislation would slam brakes on cardealers, opponents sayBy: Jim SkeenPALMDALE - A fight is brewing over legislation that advocates say will protectconsumers from unscrupulous "buy here, pay here" used car dealers, but opponents say itwill take hundreds of millions of dollars out of California and city coffers and pushpeople out of their cars and onto bus benches.A statewide coalition, which originated in the Antelope Valley, is starting aninformational campaign to oppose the passage of Senate Bill 956 and Assembly bills1543 and 1446, which coalition members say will cut off financing for people with nocredit or bad credit who are trying to buy cars."They will hurt the consumer," said Gus Camacho, owner of Camacho Auto Sales, whichhas sites in Lancaster and Palmdale. "These people wont be able to get to work."If enacted into law, the legislation would cut his sales on the cars his company financesby 25% to 50%, Camacho said. He said he started around 2000 studying how to providehis own financing to customers, including those who have had credit troubles. When therecession hit, lenders started tightening up their lending practices, including making itextremely difficult for people trying to get car loans, Camacho said."We started opening the gates on the financing side of the business," Camacho said."These are good people who have gone through tough times. Were able to help them geta vehicle and start rebuilding their credit rating."The coalition, called the "Coalition to Protect Our Freedom to Drive," includes theAntelope Valley Board of Trade, the Antelope Valley Hispanic Chamber of Commerce,the Lancaster and Rosamond chambers of commerce, state Board of Equalization
member George Runner and Palmdale Councilman Tom Lackey. Among the othermembers are the National Independent Automobile Dealers Association, the IndependentAutomobile Dealers Association of California, the National Alliance of Buy Here, PayHere Dealers, and the Community Auto Finance Association.Supporters of the bills include the California Immigrant Policy Center, the Center forResponsible Lending, the Consumer Attorneys of California, the Consumer Federation ofCalifornia, and Consumers for Auto Reliability and Safety.All three bills have passed floor votes in their respective houses of origin and areawaiting committee assignments.The bills were triggered by controversy stemming from reports of abuses in the "buyhere, pay here" industry. Car dealers were charging high interest rates, in some casesmore than 30%, and repossessed vehicles when the consumers couldnt make payments.In one case, a dealership in Hawthorne had reportedly sold more than 130 vehicles atleast three times each since July 2008."Some of Californias hardest-working residents are being exploited simply because theydesperately need a car to get to work or to drive their family to school or to the doctor,"said state Sen. Ted Lieu, D-Torrance, the author of SB 956. "Unscrupulous dealers arepushing these types of previously unregulated loans to sell cars for far beyond marketvalue, at interest rates as high as 30%. They need to either find a conscience or display asign: Rip-offs R Us."Lieus bill has three goals:Impose first-ever regulations on dealers offering buy here, pay here installment loans byrequiring them to obtain California Finance Lenders licenses, which would provideconsumers with an array of protections.Limit used-car installment loans to a maximum 17.25% interest, which would giveCalifornia the strongest cap in the nation.Change the way buy here, pay here used car dealers are able to repossess vehicles toinclude grace periods and make it easier for buyers to redeem a repossessed car.Auto dealers said the risks inherent in their business are high. When a buyer defaults, thecar must be repossessed, if it can be found, then restored to saleable condition, if it hasntbeen beaten up too badly. Dealers must also give customers the opportunity to redeemtheir vehicles, before the cars can be resold.Members of the coalition said the bills were a "knee-jerk reaction" to reports thatidentified only two dealerships with abuses out of an industry of 9,000 dealerships. Otherdealerships cited in the reports were outside California.
While Lieus bill and the other two bills are well intended, they have disastrousconsequences, opponents say.The coalition said its analysis of the bills indicates the state would lose between $234million and $374 million annually in sales tax revenue.If the bills pass, the coalition said that in some cases dealers would go out of business,and in other instances, dealers said they would no longer be able to finance buyers withless than perfect credit."These three bills, if passed and signed by Governor Brown, will bring harm to the verypeople the bills purport to help," the coalition said in a statement announcing theirinformation campaign. "This legislation will also substantially reduce sales tax revenuefor public safety in our cities and counties at the worst possible time, and also worsen ourstates $16 billion budget deficit."AB 1447, authored by Assemblyman Mike Feuer, D-West Hollywood, would requiresellers to provide a 30-day, 1,000-mile warranty and prohibit buy here, pay here dealersfrom using references obtained from customers for collection purposes.Those provisions would add licensing and servicing costs, opponents say. According toCalifornia law, dealers may not offer warranties unless approved by the Department ofInsurance, and they must meet the minimum liquidity and loss reserve requirements tocover mass losses and claims.The cost for a service contract would range from $150 to $250 or more, coalitionmembers said.AB 1534, authored by Assemblyman Bob Wieckowski, D-Fremont, would requiredealers to label every car with its "reasonable market value."Coalition members said "reasonable market value" is a vague term at best and does nottake into account the differences between cars of similar make, model and year butdifferent conditions. Coalition members called it "a disservice to consumers placing anequal value on two very different automobiles."firstname.lastname@example.org