Louisiana Dealers Cap Loan Markups at 3 Percent

In what could become a nationwide trend, Louisiana became the first state to set a 3 percentage-point ceiling on vehicle loan markups above those rates set by lenders.

The amount of the cap is roughly the same as what most captive lenders and publicly owned dealers are establishing. The lower rates resulted from a rash of class-action suits against captive lenders and several publicly owned megadealers on behalf of minority vehicle buyers. They allege their markups were higher than those granted to others.

The Louisiana Automobile Dealers Assn. initiated the ceiling legislation. Executive Vice President Robert Israel said it did so to head off any legislator-sponsored law that could peg the rate lower than three percentage points.

Several states are considering legislation requiring dealers to tell customers of any markups.