DMV comes out against rules for auto dealers
Critics see link to governor's campaign cash
(cont'd)

Further, it mandates that buyers who finance through a dealer be made aware of the lowest rate for which they qualify, and that so-called financing markups -- which reflect a lender's added-on costs -- be explained and capped at 2 percent on a standard five-year loan. Louisiana recently enacted a first-in-the-nation 3 percent cap.

The state Department of Consumer Affairs and the American Automobile Association's state branch have not taken positions on the bill.

Because the DMV is charged with licensing the state's car dealers, consumer accusations of dishonesty in a sale could prompt more agency investigations -- a worry articulated in the July 28 letter to Montañez by Bill Cather, the DMV's assistant director for legislation. An analysis by the Senate Appropriations Committee -- which the bill must clear Thursday to come before both legislative chambers -- put its potential cost to the DMV at $100,000.


Similar concerns

Cather's letter also echoed objections to the bill by car dealer groups on matters such as financing, saying the legislation "does not recognize the realities of the marketplace" and would "have a significant fiscal impact on vehicle dealers."

Cather could not be reached for comment. A colleague, assistant legislative officer Tom Weibel, said the DMV is more concerned that its oversight role may be expanded as a result of the bill and that financing reform "really isn't our issue in this."

The DMV has "a limited number of investigators, and we'd like to devote them to serious malfeasance," Weibel said. "This would be stretching that limited number even further."

The administration's opposition to Montañez's bill extends a largely cordial relationship with auto dealers that began with Schwarzenegger's recall campaign promise to roll back the much-maligned tripling of the vehicle license fee -- something Schwarzenegger made good on during his first day in office.

But car dealers' support of Schwarzenegger is based more broadly on the governor's pro-business stance and efforts to stimulate California's economy, said Welch, the auto association leader. Their campaign donations to Schwarzenegger "had to do more with the overall economic climate.""It doesn't come as a great surprise to me that the administration thinks government price controls on interest rates is a bad idea," he said.


'Not their job'

Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a consumer-advocacy group backing Montañez's bill, said "there's no question there's a different philosophy" guiding Schwarzenegger administration decisions on industry. But she said she was alarmed to find it being articulated by a regulatory agency.

"I have never seen a letter like this from the DMV before," she said. "That's not their job -- to be worried about car dealers."

The governor, she said, is "sending a message: Don't send that bill to my desk."