Late in February, the American Financial Services Association submitted a comment letter to the New York City Department of Consumer Affairs regarding the department’s proposed rules for independent dealers.
, the proposed rules would implement Local Laws 197 and 198 of 2017, which passed the city council in September. The laws and proposed rules set certain requirements for independent dealers in the city, including disclosure of the car buyer’s bill of rights.
In addition to disclosure of the contract APR, AFSA mentioned there is a requirement to disclose the lowest APR offered to a buyer by any finance company for an installment contract with same term and down payment and the APR offered to a buyer by the selected finance company.
AFSA’s letter urged the Department to reconsider its proposed disclosure form and pointed out that the disclosure of up to three different APRs may confuse consumers.
The letter also noted that the Federal Reserve Board previously considered and specifically decided against requiring a similar disclosure of fees for dealer participation due to the minimal consumer benefit.
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“While we understand the department’s goal is to provide consumers with more information through additional disclosures at the time of purchase, we believe the proposed disclosures would confuse consumers and provide little additional consumer benefit,” wrote Danielle Fagre Arlowe, AFSA’s senior vice president of state government affairs.
“As proposed, the finance disclosure would require disclosure of three separate annual percentage rates (APR): the contract APR, the lowest APR offered to the buyer by any finance company for a loan with the same term and down payment and the APR offered to the buyer by the selected finance company,” Fagre Arlowe continued. “In some cases, these three rates may be the same, but in many cases, these numbers will be different, forcing a consumer to interpret and understand as many as three different rates for the same transaction and may leave a consumer with the impression that the contract APR is lower than it actually is.
"Such confusion would not benefit consumers and undermines the federal Truth in Lending Act, which sought to provide consumers with a clear understanding of the cost of credit,” she went on to say.