Pentagon's Accusation Stings National Automobile Dealers Assn.

Auto dealers can point to their exemplary record of supporting the U.S. military. So they felt wounded when the Pentagon took aim at them, claiming dealerships have victimized service people who bought cars near military bases.

“Frankly, we were stunned,” says Stephen Wade, vice chairman of the National Automobile Dealers Assn., recalling the hub-bub. “We've supported the troops. Thousands of us have served our country. Many dealers actively help the military in buying cars.”

But trouble began when a couple of typical shady-dealer anecdotes took on a life of their own, leading to some serious charges against dealers in general, says Andrew Koblenz, NADA's vice president and general counsel.

“They were whipped up into serious allegations with no comprehensive evidence,” he says.

The fire-fight occurred when Congress was considering a financial reform act with stricter regulations on lending practices.

Some people wanted to include dealers in the legislation. Dealers balked, saying they don't make auto loans, just hook up their customers with lenders when asked to do so.

Most members of Congress saw the distinction, took the dealers' side and exempted them from the finance-reform legislation. But not before an undersecretary of defense, Clifford Stanley, fired off a few salvos in a public letter.

He complained of service people, while shopping for cars, “falling victim to predatory practices and prohibitively expensive products.”

Stanley then cited an admittedly informal, unscientific survey about perceived misdoings at dealerships.

Then the cause was taken up by, of all people, Holly Petraeus, the wife of Gen. David Petraeus, head of the U.S. Central Command. She complained to reporters that some dealers overcharged military personnel for cars they bought.

No one, not even the NADA, denies that a few shifty dealers will fail an ethics test. All sorts of rules and regulations deal with that bunch, just as the military will court martial rouges in uniform.

But it's overkill to say that the actions of a few bad apples — whether they are dealers or service people — should subject the entire group to disdain, not to mention federal laws that don't pertain to them.

“Basically that whole controversy started because of an undersecretary writing a letter,” Koblenz says at the 2010 F&I Management and Technology conference. “It became very political.”

He finds it ironic that Stanley's epistle cited available resources that advise military people on car buying and financing.

One such resource, unnamed in the letter, is NADA. The dealer trade group runs a financial-literacy education program and an outreach effort specifically for military personnel.

In 2007, Military Money, a financial magazine for service people, ran a cover story containing tips on how to get the best deal when buying and financing a vehicle.

Who wrote the article? NADA's Andy Koblenz.