Auto Dealers Make a Tough Sell on Capitol Hill

Posted April 27, 2010 at 7:00pm

An army of car dealers converged Tuesday on Capitol Hill to plead with Senate offices for an exemption from proposed new financial services reforms they claim will put the brakes on their businesses.

“We don’t loan money. We arrange financial services and loans, but we don’t originate the loans,” auto dealer Ed Tonkin said in an interview. “This is really a Wall Street reform bill that is aimed at banks and the housing market. We’re getting swept up in this very wide net that doesn’t really include us.”

On Tuesday, Tonkin met with his home-state Sens. Jeff Merkley (D-Ore.) and Ron Wyden (D-Ore.), an example of many such sit-downs for the dealers. The Oregon businessman, who is the current chairman of the National Automobile Dealers Association, was one of roughly 100 car salesmen in town this week making the pitch to not be regulated by the proposed Bureau of Consumer Financial Protection.

“We’re Main Street businesses. We’re not the intended target of this thing,” he said. “The irony is, if we get further regulated, it’s actually going to end up hurting the consumer because the universe of loans will be smaller and the prices will be higher.”

A Wall Street bill passed by the House last year excluded car dealers from the proposed agency’s purview. This week, the group is pressing the Senate to adopt an amendment sponsored by Sen. Sam Brownback (R-Kan.) that carves out dealerships.

“Auto dealers are retailers, not banks, and are already subject to a host of federal and state regulations that protect consumers,” Brownback’s office told a reporter earlier this month.

Also on the Hill with Tonkin were several auto dealers from Louisiana, including Bob Israel, who serves as president of his state’s automobile dealers association. He and several other Creole State dealers — Marshall Hebert, Mike Hollingsworth, Ray Brandt and James Lynch — made their way to meetings with Members such as Sen. Mary Landrieu (D-La.).

“We can get consumers a better interest rate on a loan we get for a consumer from a bank than a loan a consumer [himself] could get,” Tonkin added. “The model works to a benefit for a consumer.”

In a statement, Tonkin’s group on Tuesday called the proposed consumer financial protection bureau “a new super-bureaucracy” that threatens stable jobs during shaky financial times. NADA also stressed Tonkin’s point that all dealers do is introduce borrowers to lenders, not originate loans.

“There are more than 17,000 new car and truck dealers in the United States. Dealerships are small businesses that make investments in their communities by hiring local workers, paying taxes and giving Americans the ability to get to and from their jobs,” NADA said in its statement. “Dealer-assisted financing is simply a way to provide one-stop shopping for customers and offer them a better deal than they would get going from bank to bank.”

But Tonkin acknowledges his industry faces an uphill climb. The financial reform measure has the support of the White House and many Senate Democrats, and he said lawmakers are unlikely to lend a sympathetic ear to an industry that has come to Washington, D.C., with its hand out recently — and once famously in private jets. He’s also worried that the dealers’ plight is compounded by the Wall Street bill’s hyperpartisanship.

“We realize that there is a little bit of auto industry fatigue on the Hill right now, but this is such an important component of our business: 94 percent of people finance their vehicles,” Tonkin said. “We’re hoping that this doesn’t become a partisan issue, but there are a lot of people on the Democratic side in the Senate who are going to follow the party line.”

This week’s lobbying blitz is just the latest splash the dealers’ trade organization has tried to make with lawmakers. Last year, the group was a major supporter of the $4 billion Cash for Clunkers subsidy program.

According to Senate records, NADA spent $540,000 on lobbying through March 31, while the group spent $3.02 million last year on federal lobbying.