Buy Here, Pay Here Financing Frauds: How the Government Protects You from Them

When shopping for a car, you’ll likely come across dealerships promoting the “buy here, pay here” financing model in Indiana.

After the recent financial crisis and the housing market downturn, the U. S. federal government took a hard look at consumer protection laws. One of the areas that came under its scrutiny is car dealerships, including the buy here, pay here model.

In the buy here, pay here model, dealers provide financing for consumers who want to buy a car. In this sense, the dealers act as lenders instead of intermediaries.

In the aftermath of the financial crisis, however, the government came up with these regulations for the buy here, pay here model of car lots in Indianapolis and other areas.

Consumer Financial Protection Bureau

After the financial crisis, the government formed the Consumer Financial Protection Bureau (CFPB) in 2010. The agency exercises authority over buy here, pay here dealers. This is despite the exemption for car dealers under the Brownback Amendment.

The CFPB protects consumers from unfair lending practices. They also go after buy here, pay here dealers if there are indicators they’re engaging in unfair lending practices.

Federal Trade Commission

The government gave the Federal Trade Commission (FTC) expedited power to pass regulations for all car dealers. This gives the commission more power in going after fraudulent car dealers.

Before, the FTC’s rule making process can last up to seven years. But with the reform, it can now take as little as a year.

Truth in Lending Act

The Truth in Lending Act (TILA) requires dealers and other consumer lenders to provide enough disclosure about their financing terms.

The Federal Reserve oversees the compliance of car dealers, while the CFPB oversees the compliance of other lenders.

Different states also have their own regulations concerning car dealers. If you want to learn about the regulations in Indiana, visit this website.