Ramos: Auto Dealers Must End Exploitation of New York Consumers

April 16, 2004
Assemblyman Philip Ramos (D-Central Islip) commended Attorney General Elliot Spitzer’s agreement with an Albany auto dealer to reform its controversial finance charge practices. Ramos plans to follow Spitzer’s lead and introduce legislation to extend the reform to dealerships across the state.

"The work Mr. Spitzer is conducting to reform the way car dealers calculate its finance charges is a great victory for New York consumers because it sends a powerful message to dealers across the state that this practice will not be tolerated. Although the Albany dealership agreed to stop the deceptive practice, many dealers across New York still hide mark-ups in their financing," Ramos said. "We must work to end this deceptive and discriminatory practice by enacting legislation that sets statewide financing guidelines that all dealerships must adhere to."

When consumers apply for financing through an auto dealership, they are often unaware that the interest rate they’re offered is subject to the assessment of additional percentage points by the dealer –called the dealers reserve. Because the dealer does not disclose the interest, or "buy rate" offered by the lender, consumers often accept the terms without negotiation – likely assuming that the quoted interest rate is solely based on their credit history and loan duration.

These mark-up practices tend to impact racial minorities harder then other customers. A recent report by the Consumer Federation of America found that African-American consumers paid on average between $350-$500 more in mark-ups than white customers. Another study found that Hispanics pay an average of $266 over non-Hispanic loans.

"We need to end the exploitation of New York consumers through the practice of ‘dealer reserve’ and require auto dealers to fully disclose the amount of these charges and make them uniform for all consumers," Ramos said. "Ending this unethical practice would help all vehicle purchasers make informed decisions about whether to accept financing through the dealer or seek quotes from other lenders."