Car dealers adopt outlawed mortgage tactics, new consumer agency powerless against them [View All]

[Roland99]

Car dealers adopt outlawed mortgage tactics, new consumer agency powerless against them
http://www.iwatchnews.org/2011/04/11/4070/buyer-beware

After the financial crisis exposed the devastation caused by predatory lending, state and federal authorities vowed to protect consumers from practices that lured them into debt they couldn’t afford.

But Congress kept most auto loans — the second largest source of debt for Americans — out of the reach of the fledgling U.S. Consumer Financial Protection Bureau. And now many of the same tactics that led to the mortgage meltdown — like fudging facts on the loan application or charging consumers hidden fees — continue to plague auto loans, an investigation by the Center for Public Integrity found.

The politically powerful industry has also mastered a few high-pressure tactics of its own. Chief among them is the “yo-yo,” where dealers let buyers drive a new car home in hopes of locking them into a deal and later tell them their financing fell through. The tactic can lure buyers to accept a higher interest rate.

And while the financial crisis rendered subprime mortgages extinct, Wall Street is once again buying up bundled subprime auto loans, fueling a market aimed at the most vulnerable consumers and relieving dealers of the risks of making bad loans.

Caveat emptor, indeed.