As first published in Leasing News on 6.30.23: For the fifth year in a row this February, a bill was introduced in the New York State Assembly with the intent of putting vehicle brokers and independent leasing companies out of business. Over the last 5 years, various iterations of the bill have been introduced—each with a different twist. The bill introduced in February, ostensibly regulating automobile brokers, was sponsored by Assemblymember Robert Carroll. The United Auto Workers and the Greater New York Automobile Dealers Association (“GYNADA”) are behind the bill which was picked up in the New York State Senate by Senator Scarcella-Spanton. As drafted, the bill would have covered and impacted independent leasing companies as well as used car dealers, qualified dealers and internet companies.
Among other issues, the bill only permitted the consumer to pay the broker’s fee directly to the broker. The broker could not get paid by any other source. This is untenable. In a surprising twist, with just 4 days left in the legislative session, Senator Thomas introduced a different bill ostensibly regulating the brokers. Thomas’ bill was passed by the Senate although it never came to the floor for a vote in the Assembly. The new bill bizarrely prevented the brokers from getting paid by anyone other than the dealers. Among other things, this new bill also prevented brokers from preparing credit applications, making it impossible for a broker to help prepare the application for the dealer that ultimately applies for the credit on behalf of the customer.
The irony of the dealers and the union being behind the bill is that each year they claim the customers in New York State sorely need protection from the brokers. Notably, dealers’ activities continue to top the list of consumer complaints in New York State. Dealers ranked 5 of the top 10 consumer fraud complaints in 2022 for the third year in a row on the Attorney General of the State of New York (“AG”) press release dated March 7, 2023, with 2,590 complaints. This represents a 13% increase over 2021. The AG press release does not contain any reference to complaints against brokers. Moreover, last year dealers were admonished by manufacturers to stop price gouging consumers. (See GM and Ford Article) In fact, dealers made a fortune taking advantage of consumers and low inventory as a result of the pandemic. (See NY Times Article).
Automobile brokers are a key part of the auto market. They are a trusted intermediary between customer and dealer, often speak the customer’s language and explain the deal terms. Brokers assist disabled customers who need special accommodations, are unable to visit a dealership or require extra assistance to obtain vehicle conversion accessories. Qualified dealers in New York and brokers in business for more than 40 years have developed clientele whom they service for the life of the vehicle. Broker business depends on repeat customers and word of mouth. Bad practices will lead to losing customers. Brokers search out the best deal for the consumer, so the consumer spends less on a car. Without brokers, customers likely will pay more.
Moreover, in 1995, the National Automobile Dealers Association (“NADA”) entered into a consent decree with the United States Department of Justice (“DOJ”) as a result of a complaint brought against the NADA alleging anticompetitive practices designed to lessen competition among car dealers. U.S. v. National Automobile Dealers Association, Civil Action No. 95-1804 (HHG) (D.D.C.)
Among the practices alleged was urging dealers to boycott auto brokers. Dealers sought to keep brokers out of the auto market because brokers were able to create transactions for consumers at lower cost to the consumer. The NADA Reduced Margins Task Force Report in 1994 recommended: “Refuse to do business with brokers or buying services. They inevitably do harm to new vehicle gross margin potential.” In the consent decree, the NADA agreed to abstain from such anticompetitive practices for 10 years.
Just 15 years after the consent decreed expired, the GNYADA took up where the NADA left off. GYNADA’s March 4, 2021 Legislative Update stated: “[t]his week, the Association took another step forward in its effort to curtail this industry [brokers] by forming a special committee with the single task of passing sorely needed broker reform legislation.” Nowhere in the GNYADA newsletter and no memorandum in support of any of the bills introduced over the past 5 years contain concrete factual information explaining why broker activities require reform in New York. The bills are just a sweeping measure, year after year, to put the brokers out of business, thereby removing any competition against dealers.
I was hired in 2019 by the New York Automobile Leasing Brokers Association along with some independent leasing companies to orchestrate their opposition to these bills. Be certain that the fight is not over. We will need to be vigilant in the coming months to oppose this type of legislation in New York.
If you are interested in learning more or joining the battle against the broker bill, please get in touch with me.