The United States Congress is currently considering a bill that would introduce a variety of financial regulation reforms to various U.S. markets, but, as NPR recently reported, car dealers—which reportedly issue $250 billion in consumer loans every year—could be exempt from the new rules.

So what could that mean for you? Potentially bad news.

Main Street or Wall Street?

One of the reasons car dealers may find themselves exempted from the new financial regulations is that, apparently, various industry leaders have lobbied Congress by making this argument:

  • Auto dealers, unlike bankers and stock brokers, are part of the down-home “Main Street” United States, rather than the much-maligned “Wall Street” sector; however…
  • Though no car dealerships have set up shop on Wall Street, sources note that car loans are handled much the same way as home loans were during the boom, by being securitized and sold to Wall Street investors for a profit.

In other words, the image many car sellers want to project in order to avoid new lending regulations is largely unfounded in reality.

Questionable Lending Practices

While the dicing and reselling of any kind of loans now sets off warning bells for a nation still reeling from the housing market’s crash, that might be only one of the unsettling practices auto lenders are currently engaging in. According to reports, some auto lenders around the country have taken to such unsavory lending tricks as those seen during the subprime mortgage boom, including:

  • Misstating a borrower’s income so that he qualifies for a larger loan (which, in reality, he cannot afford)
  • Altering other information in documents after a customer has signed them so that she ends up with a more expensive loan than she expected
  • Charging hidden or unclearly disclosed fees to increase the cost of an automobile loan

These practices are troubling on their own, but they would be come doubly so if Congress grants auto lenders the exemption they want from the new financial regulations. So how can you protect yourself if you’re planning to take out a car loan? Consider these tips:

  • Read everything: If you aren’t contract-savvy, bring a friend who is when you go to sign paperwork. Better yet, consider running everything by an attorney before finalizing anything.
  • Shop around: Always visit more than one dealership before committing to a car or a seller. This way, if one seller makes you uneasy for some reason, you can simply walk away and buy from someone else.
  • Do some research: Visit your state’s Better Business Bureau website to see how the dealership in question is rated. And look online for forums discussing the dealership’s services or ask for personal recommendations.

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