US AUTO LOAN RACKET REVEALED

January 27, 2004

US AUTO LOAN RACKET REVEALED
PRESS RELEASE Citizens for Corporate Accountability

-Price-fixing and racketeering cycle by auto finance

-Cars prices reported as "falling" in loan index, even though big car cos. inflating price through financing

Contact: Dan Spillane DanSLegal at aol.com Citizens for Corporate Accountability 410 Denny Way #229 Seattle, WA 98122 [phone]

(SEATTLE) 01/27/04 A complaint has been filed with the US Federal Trade Commission (FTC) regarding a newly uncovered cycle of price-fixing, racketeering, and credit profiteering by major US vehicle manufacturers.

The scheme involves a pattern of distinct and consistent lowering of "reported" auto prices since 2000, by the manufacturing arms of major auto makers such as Ford and General Motors, while at the same time, makers unfairly increase profits through financing arms of the same ("Ford Motor Credit Co.", "General Motors Credit Co.") The price fixing trend is clearly recorded in US Bureau of Labor Statistics (BLS)tables, which show a normal trend in prices over many decades for new vehicles-- which was inexplicably modified starting in 2000.

This finding is significant in conjunction with the new "Hidden Finance Charges" report (01/26/04, Consumer Federation of America, “CFA”)--that provides extensive evidence of credit markups by auto maker credit companies, which inflate the actual cost of vehicles—a trend which has also increased recently.

This evidence shows a clear pattern of monopoly which harms consumers. Specifically, the artificial lowering of price figures reported to the BLS has the effect of an enticement on false terms, since the BLS statistics are systematically used to calculate the US Consumer Price Index (CPI)--which in turn, when lowered, become an enticement and "supposed" base rate for new auto loans. However, as reported by CFA, the supposed rate is not indeed applied when auto deals are closed-- instead, significant markups are hidden in the credit terms of the finance contract. As reported by CFA, this markup is applied more often to minorities.

While this cycle constitutes a manipulation of prices by the auto companies, with a false enticement, it also represents a gross manipulation of the US Consumer Price Index for private gain--as the CPI has significant weighting for new vehicles (a component which has been reported as negative recently, and has thus caused the overall CPI inflation number to be falsely reported as low. Price drop is clearly not due to a vehicle demand problem.)

It follows that the auto companies are liable for this unfair manipulation as it impacts auto credit customers who were overcharged—and as well, to any and all US consumers who lost benefits due to indexing against the US CPI (which would otherwise be higher, were it not for the monopolistic actions involved in this false enticement).

1. Here's the table

Series Title: CPI: U.S. city average; New vehicles; 1982-84=100; SA

http://www.economagic.com/em-cgi/data.exe/blscu/CUSR0000SETA01

Notice the trend which reversed in around 2000-2001. Also, the weightings for new autos increased in 2003, despite the price drop. That is not shown in this table.