United States: CFPB to monitor lenders during projected increase in auto loan debt
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On February 24, the CFPB published a Blog citing that the recent increase in car prices will lead to a continued increase in the total amount of debt and the average amount of loans, which will put increased pressure on the budget of some consumers for much of the next decade. According to data from the Bureau of Labor Statistics, the consumer price index (CPI) for used cars and trucks has risen 40% since January 2021, while the CPI for new cars has risen 12 %. Faced with such challenges, the CFPB intends to focus on:
- Securing Affordable Credit for Auto Loans: Watch closely for lending practices and structures where lenders seem to rely on high interest rates and fees to profit even when consumers fail.
- Oversight of auto loan management and collection practices: Work to ensure that incentives are aligned between repairers and consumers, that repairers make accommodations available to all consumers, and that repairer practices treat consumers fairly.
- Oversight of auto loan management and collection practices: Better understand potential barriers to competition in the subprime auto loan market that can cause variable outcomes between subprime and prime borrowers. The CFPB will continue to research auto lending policies and practices that may impede a fair, transparent, and competitive market and work with the FTC and Federal Reserve to resolve market issues.
Put into practice : Expect the CFPB to issue additional requests for comment or orders to auto finance companies as part of its broader participant oversight and market surveillance authority under the Dodd-Frank Act. The Bureau passed a rule in 2015, allowing the CFPB to oversee and review large non-bank auto finance companies. Therefore, targeted horizontal reviews of auto finance companies as well as CFPB-supervised banks that offer auto loans are one avenue the Bureau could explore to investigate current auto lending practices. Additionally, over the past several weeks, the CFPB has conducted a series of market surveillance surveys of six major tech companies and participants in the “buy now, pay later” space (we discussed these last activities in previous Consumer Finance and FinTech blog posts, here, here, and here). If past CFPB activities are any indication, research the CFPB to leverage its monitoring and surveillance efforts to identify areas of potential application.
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