Senator
United States Senate
Washington, DC 20510

Re: SUPPORT MERKLEY-LEVIN,

OPPOSE BROWNBACK AMENDMENT IN ANY FORM

Dear Senator,

On behalf of Americans for Financial Reform (AFR), we urge you to support the Merkley-Levin Amendment to S. 3217, the Restoring American Financial Stability Act of 2010, but we urge you to OPPOSE the Brownback Amendment in any form – even if the Merkley-Levin language is successfully included as a second-degree amendment.

The Merkley-Levin Amendment would ban risky proprietary trading and Goldman Sachs-style conflicts of interest by banks that receive federal funds.  It is now pending as a second-degree amendment to the Brownback Amendment, which would exempt auto dealer-lenders from the proposed Consumer Financial Protection Bureau (CFPB).

Merkley-Levin is critical to: (1) keep the risk inherent in speculative investments from again imperiling the banks that American businesses and families depend on, so that we never again have to bail out Wall Street’s bad bets; and (2) to encourage banks to spend their capital investing in Main Street, not just Wall Street.  AFR has been a strong supporter of the Merkley-Levin Amendment, and we hope the Senate records a strong favorable vote on it as a second degree amendment today.

We also believe, however, that the underlying Brownback Amendment is so harmful to consumers that it must be defeated either way.  We oppose the Brownback Amendment for the following reasons:

• Senator Brownback modified his amendment so that it now provides financial education for military families who are frequently targeted by unscrupulous dealers.  Yet this will do nothing to stop auto dealers from engaging in fraudulent or abusive practices.  While financial counseling can help consumers make smart decisions, it is no substitute for vigorously enforcing the law.

• Just like mortgage lenders who created and sold toxic mortgages into the financial markets, auto dealers are often the original lender and negotiator of the loan terms.  Although the dealer’s interest rate “markup” may serve as compensation for the work done in originating a loan, it often results in abusive and predatory lending.

• In many cases, people of color have been steered into more expensive, predatory markups by auto dealers.  While much of the auto finance industry has been subject to class action settlements in recent years, those settlements are set to expire soon.

• The current rule-making and enforcement regarding auto dealers is fragmented and ineffectual, leaving the door wide open to abusive and predatory tactics.

• An auto dealer exemption from the CFPB goes against the very purpose of the agency, which is to regulate by product, not by provider – and creates an uneven playing field for other institutions that make auto loans such as community banks and credit unions.

• Auto dealer abuses are the # 1 source of consumer complaints to the Better Business Bureau and state and local agencies.

Again, we urge you to oppose the Brownback Amendment, even if the Merkley-Levin language is included as a second-degree amendment.  If you have any questions, please contact Rob Randhava, Senior Counsel for the Leadership Conference on Civil and Human Rights, at (202) 466-6058.

Sincerely,

Americans for Financial Reform