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SACRAMENTO BEE EDITORIAL: Put brakes on 'buy here, pay here' car dealerships
June 25, 2012
The Assembly Banking and Finance Committee has a chance today to give a break to Californians who need cars but don't have much money. Or it could side with car dealerships that profit from predatory lending practices.
Committee members are set to hear Senate Bill 956, by Sen. Ted Lieu, D-Torrance, which would regulate "buy here, pay here" dealers, many of which
"Buy here, pay here" lots charge low-income customers with poor credit outrageously high interest rates and insist that they deliver payments to the dealerships. When purchasers miss payments, the dealers repossess and resell the cars.
Lieu's bill would give the California Department of Corporations authority to regulate lending practices, cap interest rates at levels at roughly 17.25 percent, and require that dealers wait 11 days after a missed payment before taking the vehicle.
Operating under the cynically named Coalition to Protect Our Freedom to Drive, dealers have mounted a major lobby effort against the bill, arguing that they provide important access to credit for people who have no credit. How noble. Lenders ought to be able to make money, but there should be a limit to the profit from providing credit.
As described in the 2011 Los Angeles Times articles that spawned the bill, one customer was a 58-year-old restaurant manager who bought a 2005 Ford from a lot in Visalia. Under terms of the deal, she must drive to the lot every two weeks to make her $180 payments, and will have paid $18,000 by the time the four-year loan is paid off.
She can't afford a lobbyist. "Buy here, pay here" dealers have hired many lobbyists. The question is to whom will Assembly banking committee members listen?