Sen. Lieu introduces bill to protect consumers from unscrupulous ‘buy here, pay here’ used car dealers
Newspaper investigation prompts consumer-protection bill
SACRAMENTO – In response to an investigation showing widespread abuses by used car dealers offering ‘buy here, pay here’ installment loans, Sen. Ted W. Lieu of Torrance today introduced a bill to regulate the industry.
"Some of California’s hardest-working residents are being exploited simply because they desperately need a car to get to work or to drive their family to school or to the doctor," Lieu said about the need for Senate Bill 956. "Unscrupulous dealers are pushing these types of previously unregulated loans to sell cars for far beyond market value, at interest rates as high as 30 percent.
"They need to either find a conscience or display a sign: Rip-offs R Us," Lieu said.
Specifically, Lieu’s measure has three main goals:
• Impose first-ever regulations on dealers offering Buy Here, Pay Here installment loans by requiring them to obtain a California Finance Lender’s license, which would provide consumers with an array of protections.
• Limit used-car installment loans to a maximum 17.25 percent interest, which would give California the strongest cap in the nation.
• Change the way Buy Here Pay Here used car dealers are able to repossess vehicles to include grace periods and make it easier for buyers to reinstate a repossessed car.
"As it now stands, used car dealers offering these ‘buy here, pay here’ loans are exempt from many of the protections that apply to other areas of finance," Lieu said. "Without these protections, consumers are paying the price – often an exorbitant price."
Lieu said he became aware of the abuses by reading a series of stories in The Los Angeles Times last fall. The documented abuses include consumers ultimately paying thousands more for a car than it’s worth while paying sky-high interest rates. Some dealers markup aging cars bought at auction more than 200 percent, mislead customers in order to repossess cars, and resell the same vehicle as many as eight times. Some dealers aggressively push for the consumer to default on the loan so that they can quickly repossess the car, keep the down payment, and resell the same car again, and again.
SB 956 will be assigned to a policy-review committee, which is expected to occur within the next month.
For more, including additional background, visit Lieu’s Web site at the address below or contact Lieu’s office. Reporters can contact Ray Sotero at (916) 651-4028 office; (916) 834-1128 cell; or ray.sotero@sen.ca.gov.
Ted W. Lieu chairs the Senate Labor Committee and represents nearly 1 million residents of Senate District 28, which includes the cities of Carson, El Segundo, Hermosa Beach, Lomita, Manhattan Beach, Redondo Beach and Torrance, as well as portions of Long Beach, Los Angeles and San Pedro. For more, visit www.senate.ca.gov/lieu
