Smart Borrower Blog

CFPB To Expand Oversight in Auto Lending Industry


Sep 24th, 2014 @ 7:20 PM by Amber Nelson


The Consumer Finance Protection Bureau released a proposal on Wednesday announcing plans to extend its oversight to nonbank auto finance companies in the U.S. Previously these companies, like those owned by auto manufacturers Toyota and Ford, had no federal supervision.

“Many people depend on auto financing to pay for the car they need to get to work,” said CFPB Director Richard Cordray in a statement. “Nonbank auto finance companies extend hundreds of billions of dollars in credit to American consumers, yet they have never been supervised at the federal level…Today’s proposal would extend our oversight, allowing us to root out discrimination and ensure consumers are being treated fairly across this market.”

The CFPB expects its expansion of authority to cover about 38 nonbank auto finance companies, which originate roughly 90 percent of all nonbank auto loans and leases. In 2013, those top 38, which likely include the finance units of car companies like Honda, Nissan and Chrysler, supplied around 6.8 million consumers with car financing.

The CFPB says that with its new powers it would work to ensure that nonbank auto finance companies are “fairly marketing and disclosing auto financing, providing accurate information to credit bureaus and treating consumers fairly when collecting debts.”

Part of the reason for the interest in increased oversight is that there have been multiple accusations in the past year against banks and nonbanks for things like discriminating against minorities when it comes to interest rates and feeding credit reporting agencies with flawed reports about car buyers.

The CFPB has the potential authority to make this change due to the Dodd-Frank Act of 2010 that allows the agency to supervise nonbanks that are classified as “larger participants” in their market. After 60 days of public comment, the proposed increase of oversight will likely become an official rule.

 

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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