Senate sends Assembly plan to protect against predatory ‘buy here, pay here’ dealers
Car buyers would have greater protections from used-car dealers
SACRAMENTO – In what promises to provide greater protections to those who buy used cars, the California Senate today approved a plan by Sen. Ted W. Lieu to crack down on dealers offering ‘buy here, pay here’ installment loans where interest can be as high as 30 percent.
“Senate Bill 956 seeks to regulate an industry that is currently unregulated under state law,” Lieu, D-Torrance, said shortly before the Senate sent his consumer-protection measure to the Assembly on a 23-12 vote. “These buy-here, pay-here used-car dealers take advantage of our lack of laws to prey on desperate workers, low-income families and members of the military by pushing 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 no more than 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, as outlined in a recent investigation by the Los Angeles Times, include consumers ultimately paying thousands more for a car than it is 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.
No date has yet been set for the Assembly to review SB 965.
For more, including additional background and a Fact Sheet on SB 956, 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
