Newspaper article THE JOURNAL RECORD

Credit Unions Want Promotions Probed / for Low-Cost Car Loans

Newspaper article THE JOURNAL RECORD

Credit Unions Want Promotions Probed / for Low-Cost Car Loans

Article excerpt

NEW YORK (AP) - The nation's credit unions are suggesting that consumers might be deceived about those low-cost car loan promotions of the big automakers, and they want the Federal Trade Commission to investigate.

They would like to know, for example, how automaker financing arms can subsidize below-market-rate loans and still report big profits. Is it because carmakers make up the loan loss through higher prices for their cars?

That and similar questions have been posed to FTC Chairman Daniel Oliver in a letter from Joseph Perkowski, chairman of the Milwaukee-based Credit Union National Association, the main national trade association of credit unions.

The credit unions, which are non-profit, member-controlled organizations, contend they have been losing a good deal of their lending business as a result of the promotions, which they hint are not everything they appear to be.

Perkowski seeks to have the FTC do two things:

%E Require automakers to fully disclose the amount of interest subsidy included in the price of cars.

%E Explore other options, including a requirement that automakers either open their subsidized loan programs to all lenders, or make cash rebates equal to the subsidy available to consumers.

As it is, he says, all car buyers - not just auto companies - subsidize the below-market rates whether or not they use the company's promotional financing or higher rates available from other lenders.

The promotions have hurt the credit unions. While their dollar volume of car loans is up slightly, said Howard Cosgrove, a spokesman, the percentage going to credit unions has dropped sharply.

At the beginning of 1985, he said, credit unions had 16. …

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