CFPA Must Cover Car Dealers and Credit Insurance
This afternoon, the House Financial Services Committee is debating a number of proposed amendments to H.R. 3126, the bill that would establish a much needed Consumer Financial Protection Agency (CFPA). Votes on the amendments are scheduled for tomorrow morning. Two of these amendments particularly deserve to die.
An amendment by Rep. John Campbell (D-CA) would exempt car dealers from coverage by the CFPA. This is wrong-headed. Most car dealers make more money from financing car sales than from the sales themselves, and predatory and discriminatory auto lending practices are widespread. A press release earlier today from Americans for Financial Reform highlights the need to include car dealers under the CFPA for their car financing activities.
An amendment by Rep. Gwen Moore (D-WI) would exempt credit-related insurance products from coverage by the CFPA. These are the only insurance products covered by the proposed legislation, and they were included by the Obama administration because they are so closely related to consumer lending. For example, “credit insurance” pays off a loan in specified circumstances such as the death, or disability, or involuntary unemployment of the borrower. Not necessarily a bad idea, if done responsibly, which is what the CFPA would require. But credit insurance is notoriously overpriced, and deceptively sold. According to a recent letter [pdf] to Financial Services Committee Chair Barney Frank from the Consumer Federation of America and four other consumer groups:
The Moore amendment is a “green light” to lenders to continue to use credit insurance as a primary tool for predatory lending and equity skimming in the refinance mortgage market, auto financing, and personal loans. Moreover, we conservatively estimate that Americans have been overcharged by at least $17.5 billion since 2004 for credit insurance alone.