Thursday, January 9, 2014

It's a Start...

Would you buy a used car from this man?

The FTC has cracked down on some fraudulent practices of car dealers.  It's a start.  Of course, you might ask, "what took so long?" and "what about the other dealers?"   And those are good questions.

The problem is, of course, that the FTC has a miniscule enforcement budget, and Republicans in Congress have tried to kill off the agency for years.  Their argument is that the FTC is "over-regulating legitimate businesses" like sleazy car dealers payday loan companies, and check-cashing stores.

The problem with this argument (besides the fact it is an outright lie) is that when we allow some companies to engage in fraudulent practices, it lowers the bar for competitors.  Other car dealers and companies then have to wallow in the gutter as well, just to stay competitive.

Operation Steer Clear identified a variety of fraudulent practices:
  • Fake sweepstakes meant to draw buyers into the showroom to see if they won a big discount on a new car. But in one case the FTC targeted, Rich said, “not a single consumer, not one, won any of the listed prizes.”
  • Hidden financing and other charges that could inflate the price of a car advertised at $15,000 by as much as another $5,000.
  • Advertised teaser prices that didn’t make clear that payments would balloon substantially after a few months.
I wrote before about these antics - advertising cars for ridiculously low prices, offering "free gas for a year" or other nonsense.   Selling used cars for 50% over market value, at interest rates of 30% or more.   It's all been done.

It is possible to sell cars at a reasonable price and make a reasonable profit.  But of course, it is a lot easier to sell cars for a lot more money, particularly to the poor and minorities (often the same group).  And it is well known in the circles of car salesmen which minorities can be the most easily exploited in this regard.

It is racist, to be sure.   And it is part and parcel of the trend, in the last 20 years, of exploiting the poor by offering them the shittiest deals around, and neutering government agencies that police such practices.  

And it is one reason - perhaps THE reason, I think - that we have seen the middle class shrink in recent years, as the "rich get richer and the poor get poorer."  The poor are offered crappy deals today that would have been unheard of back in the 1960's and 1970's.

So, today, we see some of the worst excesses being reined in.   Congratulations, FTC.   Although I expect they feel a bit like the little Dutch boy, with his finger in the dike, when there is a massive flood going on.

The world is still full of bad deals and con artists.  And it behooves the consumer to do two things.  First, think skeptically - stop watching television and believing in something-for-nothing deals.

Second, stop voting for people who think payday loan companies are "legitimate businesses" that need to be protected from "over-regulation."

And you can pretty much figure out who that is.....