It’s the nature of capitalism today. Once one area is sucked dry or the predatory scheme is uncovered these predators move to another area. Now, the predators have moved on to auto loans.
Center of Public Integrity’s released a very informative report called Buyer beware. Here are a few excerpts from the report (I strongly encourage people to read the entire report):
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.
While the consumer thinks the negotiations are over at that point, dealers know that a lot more profit can be made off the financing.
For starters, dealers routinely jack up the interest rate on a loan and split the profit with the lender. So if you qualify for a 4 percent loan, the dealer will say the best he can do is 7 percent. Half of the extra profit goes to the dealer as a “markup.”
Buyers never know they’ve been charged more because the markup usually isn’t disclosed. The Center for Responsible Lending calls these “kickbacks” and calculates that they cost car buyers $20 billion a year.
It should be no surprise that new Consumer Financial Protection Bureau is powerless against these predators. The auto dealers/lenders secured an exemptions from the new consumer protection law. Money speaks volumes in Washington.
The best defense is the best offense against predatory lenders. We have to arm ourselves with information and an understanding of what the predatory practices are so that when we experience them we know to just walk away. The Center for Responsible Lending has a wealth of information about auto loans and the predatory practices. Please check them out before making that next auto purchase.
Another thing: if you don’t know or not sure about something - ask someone before you sign on the line (other than the dealer) - a neighbor, friend or us. We can no longer expect or afford to wait for our government to protect us from predators. We are in this together.
economy financial+crisis budget+deficit obama unemployment jobs credit+cards debt social+security personal+finance capitalism deficit bailout mortgage new+economy mortgage+crisis economic+crisis wall+street+bailout job+guarantee retirement+savings economic+stimulus cooperatives credit+unions deficit+hawks income+inequality health+care+reform financial+regulatory+reform 401k worker+cooperatives gdp federal+debt financial+conglomerates tarp financial+oligarchy new+normal money scams fiat+currency debt+management middle+class wall+street investing consumer+debt investments china economic+growth federal+reserve wages globalization savings neoliberal consumer+protection stimulus unemployment+rate tax+cuts government+spending negative+equity risk foreclosure budget financial+planning credit+card+debt debt+settlement federal+deficit democrats republicans stocks financial+literacy jobs+crisis foreclosures move+your+money full+employment modern+monetary+theory stock+market neo-liberal checking economic+policy u.s.+treasuries job+growth bonds economic+mobility bank+of+america foreclosure+fraud taxes consumer+spending cfpa ira class+war inflation jobs+report financial+bailout fiscal+policy evil pete+peterson health+care financial+stability+plan poverty trickle+down+economics working+class retirement currency wills economics #finreg tbtf monthly+budget estate+planning consumer+credit auto+industry president+obama gold+standard debt+ceiling center+for+responsible+lending mutual+funds innocent+fraud aig life+insurance personal+income market+fundamentalism consumer+financial+protection+agency trade+deficit banking identity+theft cash+flow compound+interest fraud too+big+to+fail fdic state+of+the+union predatory net+worth u.s.+treasury+securities class+warfare bankruptcy mortgages derivatives goldman+sachs great+recession debt+consolidation eu keynes gold fico+scores refinance credit+scores real+estate debt+crisis banking+system mortgage+foreclosure financial+regulation financial+crisis+inquiry+commission deficit+commission debt+servitude krugman federal+budget de-regulation solidarity free+trade wisconsin debt+collection income+tax refinancing loan+modifications cash+management treasury+securities detroit+schools home+buying economic+purgatory long+term+unemployment vicious+cycle bartering emergency+savings efca debt+hysteria home+closing banks deficit+hawk american+capitalism community+gardens economic community+banks debt+to+gdp recession austerity online+scams income+taxes investment inequality estate investment+yields happy+year finreg hyman+minsky american+dream email beige+book mortgage+modifications yuan risk-return investment+advice dot+com+bubble leading+economic+indicators malicious+software deflation corporate+bailouts federal business+roundtable cooperation returns housing+bubble chris+dodd lei deferred+annuities bailouts economic+policies balancing+checkbook alternatives disability+income+insurance scam fiscal+sustainability home+mortgage fixed+rate+annuity lobbyists debt+is+evil balance+check+book credit+report teach-in currency+manipulation bill+gross insurance variable+rate+annuity corporate+tax+breaks credit+card+law deficit+spending tina june+jobs+report general+motors economic+indicators budgeting financialization warren+mosler washington+consensus foreclosure+rescue+services gross+domestic+product race+to+bottom big+banks marx credit+card minsky tips open+auction lost+decade financial+genocide republican+budget emergency new+capitalist+manifesto bank+fees reaganomics overdraft cfpb galbraith social+security+cards geithner commercial+real+estate direct+jobs+program civil+disobedience human+capital direct+deposit etf economic+justice barack+obama worker+ownership personal+consumption treasuries protests balance gas+prices obama+administration destruction citizens+united outlays wall+street+bailouts exports household+debt fallacy+of+composition securities+laws save public+option living+standard unions july+2011 unemployment+benefits imports card+act fallacies emergency+funds deductibles strategic+defaults keynesian wiped+out productivity+ralph+nader new+era+windows laid+off citigroup financial+sector foreclosure+gate auto+loans human+capitalism savings+tip financial+reform arra free+credit+report chicago money+market+accounts unemployment+insurance fox+news+channel credit+rating+agencies credit+reports fallacy money+market+mutual+funds afl-cio fox move+money predatory+lending refund+anticipation+loans jobs+data moody's revolution tax+reform uaw employment principal+reduction roger+ailes close+banking+accounts countervailing+powers tax+refund debt+forgiveness lehman+brothers cornel+west exuberance denmark propaganda banking+services john+k.+galbraith monetary+policy option+arm mortgage+loan+modifications subprime+mortgages corporate+profits disposable+income national+infrastructure+bank corporate+welfare u.s money+manager+capitalism birth+certificate fundamentals living+wage output+gap success consumption interest+rates greece quantitative+easing political+system john+mccain minimum+wage new+democrat+coalition two+americas ltcm universal+health+care income+distribution household american+recovery+and+reinvestment+act oligarchy two+economies frontline senate+democrats eurozone debt+commission haymarket existing+home+sales jobless+recovery carried+interest john+edwards income regulations ben+bernanke california+budget catfood employee+ownership paladino robert+reich mark+to+market budgets payroll+tax euro chicago+idea fannie+mae housing+market cowards slavery dollar sector+balances gmac life+settlements tax+holiday ireland mlk subprime bad+bank bullshit target+date+mutual+funds argentina fierce savings+plan alan+greenspan deficit+errorists payroll+tax+holiday phone+scams financial+regulations national+debt free+markets united+states now savings+bonds shadow+banking+system fica+tax madison time+value+of+money cost+of+unemployment ponzi+schemes swipe+fees credit+markets fair+debt+collection+practices+act tax+code #wallstreetscam great+divergence paulson future+value pensions fed+audit debit+cards predatory+home+lenders cash cdo walker warren+buffett treasury+department present+value tax+deal cooperative+economy liquidity u.s.+debt poverty+rates conservatives ppip job+loss 20-year+mortgage obama+tax+deal short+sales