Musings from Brian J. Noggle

Dear Consumer: Just Say No

In another attempt to save the consumer from himself, the Illinois Attorney General is cattle-prodding the Illinois legislature to the rescue. The St. Louis Post-Dispatch reports.

Typical sob lead:

When Michael Rogers drove out of a car dealership three years ago in his newly purchased GMC Jimmy, he thought he understood the financing arrangement. The interest rate the dealership gave him on the loan - 20.95 percent - sounded high, but the dealer had explained that Rogers' checkered credit history had required it, and he'd accepted that explanation.

"I thought it was a good deal for me," said Rogers, 45, a former postal worker in Chicago who is on disability. "I knew I'd had some credit problems ... so, I figured, 'Yeah, my credit must be bad.' I figured this was the punishment."

After more than two years of paying $409 a month on the car, Rogers learned that he had actually been approved for a 9.25 percent loan from a lender. Unknown to Rogers, the dealership had then added the additional 11.7 percent itself, raising the final cost on the $17,000 car by almost $7,000.

Aw, poor baby. You know, I got socked with a .9 percent financing rate in March, 2001. A year later, rates were 0 percent as car makers tried to ensure continued sales after September 11. So I feel your pain, pinhead.

21% on a car? Jesus H. Gonzalez, but that's a damn high rate to pay. Come to think of it, $17,000 is a lot to pay for a vehicle, especially at 21% interest. It took me almost four years to run my credit cards up to that amount, but that included a night at a "Fantasy Suite" establishment which included an in-room swimming pool, sauna, waterfall, and complimentary bottle of champagne. A lot to spend for one person, but at least it wasn't $17,000. What's my point?

Oh, yeah, you, Joe Stupid Consumer, are an IDIOT to spend that much on a car at that rate of interest and assume it's the best rate without shopping around. Fortunately, the Daley State will come to your aid and will straitjacket business because you, the consumer, are mad.

Attorney General Lisa Madigan is pushing legislation that would require car dealers to tell customers how much of their car loan interest rate was determined by the lender, and how much the dealer has added on to it.

Thank heavens! The Illinois Government to the rescue!

The markup system is common in auto financing nationwide, including in Missouri. Lawmakers in Missouri are not considering any legislation to require disclosure of the actual loan rate.

The Post-Dispatch ruefully reports this, because it's on the side of the working man in every contest wherein the reigning champion isn't the newspaper industry.

One dealer promised to get a car buyer the "best" rate for a loan. The dealer offered the customer a loan at 16.95 percent interest. It turned out that the dealer was secretly paying 14.95 percent interest to a lender and pocketing the difference.

"I asked the dealer why he was charging my client a higher rate than the one approved for my client," says Mitchell Stoddard, an attorney in St. Louis County. "And he looked me in the eye and said: 'We gotta pay our bills.'"

All right, your crackhead investigative journalism has probably uncovered a dealer offering a deal to a subprime customer, wherein the dealer says the "best" rate, and probably means the "best" in the sense of the best in which the dealer would offer. Come on, PD, you don't hammer advertiser Anheuser Busch in any advertisement wherein it proclaims any superlatives, particularly those including taste--so why come down hard on the poor SOB auto dealer who has bought a corner lot and a couple junkers in a throw at the American Dream?

I have sympathy for the business in this case because 1.) it's someone taking a shot at making money, and 2.) it entered the contract with its eyes open, unlike the less-than-savvy consumers you defend. But the intelligent don't need government, or crusading "journalism," protection. They understand the free, voluntary exchange in any business transaction.

We'd also prefer you not pollute the swimming pool with more legislation and regulation, thanks.

- posted by Brian J. @ 8:57 PM