Fair-Weather Foes

If you aren’t familiar with the work of Elizabeth Warren, this issue should serve as a helpful introduction. Jim Ziegler and Tom Hudson hold out the senior U.S. Senator from the Commonwealth of Massachusetts as the poster child for well-intentioned public figures who have no clear idea of how dealers operate or the principles they hold dear.

Sen. Warren’s name is synonymous with the Consumer Financial Protection Bureau (CFPB), a regulatory agency she proposed and helped to establish in the wake of the financial crisis that helped send the nation spiraling into the Great Recession. Her tenure as acting director and subsequent, successful Senate campaign elevated her profile from that of a highly esteemed Harvard Law School professor to that of a highly estimable politician and potential presidential candidate.

To the dismay of then-director Warren and many others, thanks to the fine work of the National Automobile Dealers Association (NADA), dealers who do not directly finance their customers’ vehicle purchases earned a well-deserved exemption from CFPB oversight. The news came as a great relief to our industry, but it put a target on the back of dealer-arranged financing.

The proof is in the pudding. Sen. Warren recently renewed the call for Congress to extend CFPB oversight to all dealers, labeling auto loans as “the most troubled consumer financial product” and, as Hudson points out, citing an oft-repeated and stunningly inaccurate 2011 report from the Center for Responsible Lending that stated, in part, that dealer participation costs American car buyers more than $26 billion a year and adds an average of five percentage points to the cost of their loans.

Ziegler believes Sen. Warren’s ultimate goal is to eliminate dealer-arranged financing altogether, a dream shared by Julie Menin, commissioner of the New York City Department of Consumer Affairs — at least for subprime customers.

I have a problem with this. Actually, I have two problems.

First, there is no substitute for dealer-arranged financing and the buying power, convenience and efficiency it brings. Your F&I managers do for car buyers what very few of them could do for themselves. They hunt for the workable deals that put credit-challenged customers back on the road. They advise prime-credit customers to keep their cash in the bank and take advantage of the generous financing terms they’ve earned. They educate all car buyers on the importance of GAP, service contracts and protection products — to earn money for themselves and the dealership, yes, but also to secure their customers’ investments.

Second, I cannot recall a time during the period that preceded our industry’s heroic recovery in which dealers were under fire to the degree they are today. Where were the assaults on dealer-arranged financing when the industry was struggling? Why did success make villains of you?

I will be the first to admit that I possess neither the desire nor the wherewithal to commit to a life in public service. Sen. Warren has a difficult job that very likely robs her of the privacy and time with family I cherish. But I like to think that, if I did attain a position of authority akin to that of a legislator of state attorney general, I would make certain that I picked my targets more carefully and allowed one of the great engines of our economy to continue firing on all cylinders.