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Senate panel OKs Sen. Ted W. Lieu bill to protect consumers from predatory 'Buy Here Pay Here' dealers
April 18, 2012
Consumer-protection law would protect against ‘Buy Here, Pay Here’ dealers
SACRAMENTO – In response to widespread abuses by used car dealers offering ‘buy here, pay here’ installment loans, state policy experts today approved first-ever regulations on a booming industry where interest can be as high as 30 percent.
“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,” Sen. Ted W. Lieu, D-Torrance,told members of the Senate Banking and Financial Institutions Committee about the need for his plan, Senate Bill 956. “Buy Here Pay Here dealers are pushing these types of unregulated loans to sell cars for far beyond market value.”
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 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 next be heard on April 24, 2012 by the Senate Judiciary Committee.
For more, including additional background, visit Lieu’s Web site at the address below or contact Lieu’s office.
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
PHOTO CAPTION: RIPPED OFF (April 18, 2012) - Witnesses during the first policy hearing on SB 956, Buy Here, Pay Here, by Sen. Ted W. Lieu shortly before the Senate Banking and Financial Institutions Committee approved the consumer-protection bill. From left, Jendry Ramos of Richmond, a victim of a Buy Here, Pay Here dealer; Rosemary Shahan, president of Consumers for Auto Reliability and Safety; Mark Anderson of San Francisco, Ramos' attorney; Cliff Costa, legislative director for Sen. Ted W. Lieu; and Lieu.