I recently attended an NADA Government Relations Committee meeting in Washington, DC. I had very productive discussions with all three members of our South Dakota congressional delegation. Senators Thune and Rounds and Representative Noem are all supportive of our legislative priorities: support the CFPB Reform Bill to keep auto loans affordable and accessible, ensure that changes in LIFO and advertising deductibility do not hurt small business, and focus on strategies to boost recall completion rates instead of grounding vehicles for minor recalls.Each of these priorities is an easy discussion because they have such broad appeal outside of our industry. Community banks are being crushed by the same heavy-handed tactics the CFPB is trying to apply to auto dealers and lenders. Ultimately, fewer community banks and fewer auto lenders does not serve the consumers which is what the CFPB purports to do.
LIFO (last in, first out) is a longstanding inventory accounting method used by businesses to help mitigate rising inventory costs as it allows companies to calculate their income by basing sales on the newest inventory for goods, such as vehicles and parts, which increase in price over time. It is a strategy used by many businesses, big and small, to keep more capital in the business for future investment. Any drastic changes will decrease capital investment by businesses.
Any bill regulating rental and used vehicles under any open recall could cause a significant disruption for consumers, rental companies and dealers. As we dealers know better than anyone, the majority of vehicle recalls do not require the drastic step of grounding the vehicle. In fact, many of the recalls we saw in 2014 would have been handled under "service bulletins" in the past. The current vehicle recall process was not designed to differentiate among potential levels of risk. It would make much more sense to create policies tailored to boost consumer recall response and completion rates. Of course, that's why we shouldn't expect those policies from Washington regulators!
Wall Street Journal Offers Peeks Behind the CFPB Curtain
While Senator Elizabeth Warren (D-MA) was saying that the CFPB should assume oversight of auto dealers, which were left out of the Dodd-Frank Act (a discussion fully vetted during the debate of Dodd-Frank), the Wall Street Journal was offering some insight into exactly how the CFPB goes about their business.
In an April 6 editorial entitled Washington’s Latest Bank Heist, the Wall Street Journal exposed the double secret methodology (Bayesian Improved Surname Geocoding) behind CFPB's accusation that auto dealers are charging minority buyers higher interest rates on car loans than they're charging similar white customers.
A week later, on April 13 in Do Two Half-Victims Make a Whole Case?, the Journal opined that it was unreasonable to fine an auto lender (specifically Ally) if you could not identify a victim.
These two opinion pieces make the auto dealers argument in a very clear and simple manner. No ad NADA could ever buy would come close to the value of these op-ed pieces. I urge you to read them and pass on to anyone who does not understand the issue!
Detroit News Commentary: Direct Auto Sales Could Raise Car Prices
In another article that makes the dealers' case, Lawrence J. Spiwak, president of the Phoenix Center for Advanced Legal & Economic Public Policy Studies, makes the case that intra-brand price competition, which is the by-product of many state franchise laws, saves the automobile consumer money. Not requiring auto manufacturers to sell their cars through independently owned local dealerships will only serve to drive end prices up for consumers.
Another opinion piece that lays out the issue clearly and concisely in a medium that ads cannot be purchased. Just when you think the media are stacked against you...
