Links in “Auto Lending”

The market in subprime auto loans is booming. Banks appear to be heading down the same path as they did with subprime mortgages: high rates coupled with insufficient consideration of the borrower’s ability to repay. Not so with credit unions. [7/28/14]

Three cases that reflect insider and vendor fraud highlight the need for strong internal controls and effective vendor oversight. In one case a used auto dealer engaged to sell a credit union’s repossessed cars sold the cars for one price, told the credit union the price was less and pocketed the difference. In another case, a credit union assistant branch manager discovered fraud on the part of one of her member services representatives and decided to cash in on the fraud, as well. [7/1/14]

Last year, the CFPB warned banks that dealer finance charge participation may violate Fair Lending rules, even if the practices are neutral on their face. The industry pressed for clarification from the CFPB on how it determines what would constitute discrimination. In testimony before the House yesterday, CFPB Director Cordray says that the bureau will be issuing a white paper this summer regarding the use of proxy methodology it would use. [6/19/14]

House Financial Services Committee Chairman Jeb Hensarling (R-TX) sent a letter today to CFPB Director Richard Cordray once again pressing the CFPB for information about its March 2013 auto finance guidance and its actions since that time to pursue allegedly discriminatory practices by auto finance companies. That guidance sought to publicly establish the CFPB’s grounds for asserting violations of ECOA against bank and nonbank auto finance companies for the alleged effects of facially neutral pricing policies. [6/16/14]

Several trade associations are lending their support to an amendment to the appropriations bill for fiscal year 2015 that would prohibit any funds made available by the Act from being used in "disparate impact" litigation. Under the disparate impact theory, even a lender who takes every step to prevent discrimination and treat all consumers fairly and equally could be the target of serious claims if it impacts a protected group adversely. For example, the DOJ and CFPB recently entered into a $98 million settlement with a bank for its indirect auto lending program. [5/30]

The National Credit Union Foundation and the Filene Research Institute are partnering with 14 credit unions in a subprime auto loan program. The program designed to assist low- to moderate-income borrowers is being funded by the Ford Foundation. [4/23]

An outspoken critic of the indirect auto lenders was in the audience at a recent CFPB forum and was called upon to speak as an audience participant. What the audience didn't know was that the CFPB had flown him in and put him up. Makes one wonder what the FTC would have to say about that. [4/16]

National Automobile Dealers Association has issued guidance to help auto dealers deal with CFPB's fair lending bulletin. Guidance recommends that dealers set a standard markup for all buyers, which can only be reduced for specified reasons. [1/29]

Credit rating service Fitch warns that CFPB's heightened scrutiny of potentially discriminatory practices in auto lending will increase costs for auto lenders in 2014. [1/21]

The trends show that 2013 was the strongest year for auto sales since 2007 and the expectations for 2014 are even higher. New auto loan growth is outpacing used auto loan growth, which means higher average loan balances. [1/7]