A congressional panel began hearings today into whether used- vehicle dealers are taking unfair advantage of customers, especially low- and middle-income and minority consumers.
"Evidence suggests that fraudulent practices with regard to both the condition and financing of used cars are on the rise," Rep. Bobby Rush, D-Ill., said in prepared remarks. He is chairman of the Subcommittee on Commerce, Trade and Consumer Protection of the House Energy and Commerce Committee.
Rush said federal and state laws protect consumers from abusive practices, but he is concerned they form an ineffective patchwork. Rush said he wants to determine whether the Federal Trade Commission is making proper use of its authority to issue rules against "unfair or deceptive acts or practices."
One possible step, Rush suggested, is to make vehicle history reports available at the time of sale. He said many low-income buyers don't have Internet access to examine vehicle background information, either from commercial providers or a new government database.
The subcommittee also will look at used-car dealers' roles in arranging or providing consumer financing, Rush said. "Too often, the dealership and creditor work together to needlessly saddle customers with high interest loans or exorbitant fees," he said.
Among the witnesses scheduled to testify at today's hearing was Keith Whann, general counsel for the National Independent Automobile Dealers Association, which represents more than 20,000 nonfranchised used-vehicle dealers.
In prepared remarks, Whann said the industry is heavily regulated. He said used-vehicle dealerships are among the few places where "credit-impaired" consumers can turn for financing.
In return, Whann said, the dealerships must pay taxes "on anticipated revenue that has not been received and, in many cases, will never be received."
He added: "Allowing motor vehicle dealers to use the cash method of accounting or something similar would not only help provide a boost for our weak economy by aiding motor vehicle dealers, it would also give more economically disadvantaged individuals access to much-needed transportation."
The National Automobile Dealers Association, which represents franchised dealers, was not scheduled to testify at the hearing. NADA officials told Automotive News they consulted with congressional staff about the issues the subcommittee plans to examine.
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