The Maryland Senate Financial Committee voted down a bill last week to extend the Financial Consumer Protection Commission’s regulatory power for two years, effectively decommissioning the state-run watchdog on June 30 and scrapping a requirement that auto dealers disclose to consumers the “buy rate” on loan contracts.
The buy rate refers to the lowest annual percentage rate a lender would require to purchase the contract; the bill called for dealers to disclose whether they were being compensated for offering a higher rate, also known as the “contract rate.”
Specifically, the legislation would have prohibited dealers from participating in finance charges that would result in a 2 percentage point difference between the buy rate and the contract rate for loans up to 60 months, and a 1.5 percentage point difference for loans longer than 60 months.
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The intent of the bill was to provide greater transparency and limitations to “auto dealers’ role in the indirect lending processes by lenders,” according to a Maryland General Assembly fiscal and policy note. “The legislation was very ambitious in respect to auto finance,” said Kelly Lipinski, a member with McGlinchey Stafford’s Consumer Financial Services Compliance practice.
“It’s important to acknowledge that even though the commission [will disband], it still had its successes,” Lipinski said. “The [commission] has a legacy. It’s not going to exist anymore, but it has [made reports] that will continue to protect consumers.”
The National Automobile Dealers Association testified in front of the commission in November 2018 on dealer restrictions, and the American Financial Services Association presented written testimony, according to an AFSA release. A spokeswoman for state Sen. Jim Rosapepe (D), the bill’s sponsor, declined to comment.
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