Public Policy Positions
Automobile Financing and Subprime Loans
News reports have drawn inaccurate comparisons between motor vehicle financing and the subprime residential mortgages often blamed for causing the recent financial crisis. These comparisons also have led to an investigation by the U.S. Department of Justice.
The comparisons between subprime mortgages and auto loans fall short in part because the underlying assets and the forms of credit themselves are vastly different. Unlike the mortgage loans that led to the economic crisis, vehicles can be repossessed fairly inexpensively, are not “flipped” and rarely appreciate in value. Vehicles are an essential part of everyday life for many people, whether for transportation to work, getting to medical appointments or simply going to the grocery store. Consumers from all walks of life need access to affordable financing for a vehicle. An increase in subprime vehicle finance means that more working class Americans have access to reliable transportation when they need it, which could make the difference between holding a job or not.
At the end of 2015, the U.S. House of Representatives passed a bill that would limit the Consumer Financial Protection Bureau’s (CFPB) aggressive auto lending guidance requirements. By a 332-96 vote, H.R. 1737 – the Reforming CFPB Indirect Auto Financing Guidance Act – would revoke 2013 auto lending “guidance” from the CFPB. That guidance suggests lenders should either impose limits on or eliminate dealerships’ discretionary ability to adjust, on a case-by-case basis, the amount of compensation they keep for arranging a consumer auto loan. CFPB claims that can lead to discriminatory loan pricing. CFPB also has failed to disclose its methodology for measuring the presence of disparate impact or to provide transparency in issuing guidance to auto lenders. This Bill is aimed at resolving that lack of transparency by reinstating public notice and comment to their rulemaking process. The House bill is currently in the Senate Committee on Banking, Housing, and Urban Affairs. Senator Jerry Moran (R-KS), a member of that Committee, has introduced S.2663, as the Senate companion measure. Volkswagen Group of America is working with the NADA and our coalition allies to help educate policymakers about automobile financing, as well as the many differences between auto loans and subprime mortgages.
– No, Subprime Auto Loans Are Not Like Subprime Mortgages (Bloomberg, 3/11/2016)
– NADA, AFSA dispute New York Times editorial on subprime auto loans (AutomotiveNews, 8/13/14)
– Moody’s Tamps Down Concerns About Surge in Auto Loans (NY Times DealBook, 8/12/14)
– No, There’s Not a Bubble in Subprime Auto Loans (Bloomberg Businessweek, 8/8/14)
– Focusing on G.M. Unit, U.S. Starts Civil Inquiry of Subprime Car Lending (NY Times DealBook, 8/4/14)
“Right to Repair” Legislation
Some states are considering legislation to require automakers to provide independent auto repair and maintenance shops with the same information and tools that the automaker’s authorized dealers and repair shops receive. However, the information needed for independent repair and maintenance shops to make repairs is already available, and the additional information required to be disclosed by the legislation could have unintended consequences that hurt consumers and the industry alike. Volkswagen Group of America urges you to oppose this legislation.
A number of states and the federal government are considering legislation addressing the use of aftermarket parts. Elements of this policy include airbag fraud rules, right to repair legislation and aftermarket parts bills. Automakers support consumer choice in vehicle repair, and we believe consumers are best protected when their repair options are fully disclosed and they have a right to choose the type and quality of parts to be used to repair their damaged vehicle. Legislation that allows insurers to mandate the use of aftermarket crash parts in collision repairs undermines consumer protection and should be opposed. Volkswagen Group of America urges you to oppose this legislation.
Congress is considering H.R. 1057 and S. 560, the Promoting Automotive Repair, Trade and Sales (PARTS) Act, which would reduce patent protection terms for automotive design and repair parts from 14 years to 30 months. During this time other suppliers could test, research and develop parts on a not-for-sale basis. This proposal denies businesses the ability to rightfully protect their intellectual property, and it promotes piracy among all global industries. The proposal also could lead to higher costs and higher insurance rates. Similar measures were introduced in the last Congress and did not pass. VWGoA opposes this legislation.
On February 2, 2016, the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet held a hearing on the measure.
- Background Information (PDF)
- Background Information on the Promoting Automotive Repair, Trade and Sales (PARTS) Act, introduced by U.S. Representatives Darrell Issa (R-CA) and Zoe Lofgren (D-CA) (PDF)
Tax Increases on “Luxury” Vehicles
Some states have considered raising the sales tax on vehicles whose price exceeds a certain amount. Volkswagen Group of America opposes these tax increases, which would have a ripple effect on the state’s economy, costing jobs and car sales, and causing significantly more economic loss than would be gained by any modest revenue increases that may result from the tax. Although these taxes are intended to target purchasers of higher cost vehicles, those hardest hit are the workers who make, sell and service these vehicles – and their families.
- Background information (PDF)