Latest Auto Lending News
Here are the latest news in the world of consumer auto lending. Stay informed on the latest practices affecting the cost of your next car loan and vehicle.
- Consumer Bureau Warns Auto Lenders on Discriminatory Rates
Reuters 21 Mar 2013
The Consumer Financial Protection Bureau on March 21 warned auto lenders that they might be liable for breaking the law if they engage in a common industry practice that consumer advocates say results in higher interest rates for minority borrowers...
- Banks Brace for Looming Crackdown in Auto Lending
American Banker 18 Mar 2013
The Consumer Financial Protection Bureau is readying a crackdown on interest-rate markups that automobile dealers tack on to the cost of vehicle loans. Through a practice known as dealer participation, the dealer typically retains most of the markup -- which usually ranges from 2. to 2.5 percentage points...
- More Subprime Buyers Getting Auto Loans
Associated Press 05 Mar 2013
Banks and finance companies continue to write more auto loans to subprime buyers, but those buyers' average credit scores remain higher than before the recession. Experian Automotive said Tuesday that 43 percent of new and used car loans written in the fourth quarter of 2012 went to subprime buyers...
- Year-Over-Year Late Car Payments Fall
Worcester Telegram & Gazette (MA) 26 Feb 2013
More Americans fell behind on auto-loan payments in the last quarter of 2012, although this is a common occurrence due to holiday spending. Beyond the seasonal increase, however, the late-pays on vehicle loans fell on an annual basis to nearly the lowest point in 10 years, according to TransUnion. The rate of auto loans with payments late by at least 60 days was 0.41 percent in the last quarter of 2012, an increase from 0.38 percent in the previous quarter but down from 0.46 percent a year earlier. Most borrowers keep making paying their auto loans a priority over other debt payments. "Consumers are valuing their auto-related loans a little more ahead of other things when they do get a little bit stretched in their budgets," said TransUnion's Peter Turek.
- Consumer Bureau Said to Warn Banks of Auto Lending Suits
Bloomberg BusinessWeek 21 Feb 2013
The U.S. Consumer Financial Protection Bureau has told at least four banks that it may sue them over vehicle loans and interest-rate markups by auto dealers that appear discriminatory, according to insiders. At least four banks received letters from the CFPB last week giving them 15 days to provide an explanation. The letters indicate the bureau believes the banks may have violated the Equal Credit Opportunity Act, a 1974 law that bars discrimination in lending.
- Confident Consumer: Don't Take Car Until Loan Is Final
USA Today 07 Feb 2013
Many consumers may be tempted to drive their newly purchased vehicle home while a dealer works out the financing; but in a practice called "yo-yo financing," the terms discussed at the dealership could change after a buyer goes home with a car. An unscrupulous dealer may try to bring buyers back to sign a different, more expensive agreement. The Federal Trade Commission (FTC) is considering whether to propose new rules to address this practice. The National Automobile Dealers Association says yo-yo financing already is illegal in every state because it is deceptive and the dealer acts in "bad faith," such as knowingly quoting a rate that will not be approved for that buyer. The Center for Responsible Lending (CRL) reported to the FTC in 2011 that 27 percent of people who contacted one of five groups about auto finance problems reported yo-yo scams. In more than half of these 590 cases, people had trouble getting their down payment or trade-in vehicle back, or the dealer threatened legal action if the new car was not returned. Consumers can best avoid car financing problems by knowing their credit score and credit report before applying for a loan, by joining a credit union and see what loans they can get from there, and by renting if they have to have a car before the deal is finalized. Consumers should not bring a car home until the deal is completely final. Resources like the CRL, autofinancing101.org, and the Consumers for Auto Reliability and Safety can also be useful.
- How to Spot a Car Loan Modification Scam
Yahoo! Finance 01 Feb 2013
Scams involving auto financing are on the rise, and regulators have taken notice. In March 2012, the Federal Trade Commission took its first actions to halt car loan-modification schemes, which target vehicle owners who hope to avoid repossession. It complained Hope for Car Owners LLC and Auto Debt Consulting charged consumers hundreds of dollars, with a promise -- undelivered -- to lower their monthly car loan payments by anywhere from 25 percent to 50 percent. The Center for Responsible Lending (CRL) reported in April 2012 that, in a study of five organizations that help consumers with auto financing problems, about 27 percent of consumer complaints fielded by those groups involved "yo-yo" financing. This type of scam occurs when a car dealer leads a buyer to believe that the financing is final and allows the buyer to drive off the lot with a new car. After days or even weeks, the dealer calls to say that the financing fell through and that the buyer must sign a new contract -- one that usually has less favorable terms. "The dealer can charge you for wear and tear on the car or even a daily rental fee for the period you've had the car if you choose not to refinance," explains CRL's Christopher Kukla. In what are called negative equity scams, dealers do not clearly explain to consumers that, in offering to "pay off" the balance due on a trade-in, the negative equity would actually be applied to the borrower's new car loan balance. Many customers did not realize this until they signed their new auto financing paperwork. Another type of scam is loan packing, in which the seller may pressure consumers into purchasing additional products such as an extended warranty, gap insurance, rustproofing, or service contracts. Some items are unnecessary, according to Kukla, and many of them may be cheaper elsewhere.
- California DMV Reminds Motorists of New 2013 Laws
Manteca Bulletin 19 Dec 2012
The California Department of Motor Vehicles is putting the public on alert that new laws affecting California drivers will take effect with the new year. Along with new fees and safety standards, state legislators also approved new consumer protections against "buy here pay here" auto dealerships. As of Jan. 1, used-car dealers that finance buyers directly will no longer have the authority to force borrowers to remit payments in person, except in the case of the down payment. AB 1447 also narrows down the circumstances under which "buyer here pay here" dealers can use electronic tracking technology to locate a vehicle and forbids them from disabling a vehicle with starter interrupt technology unless the buyer was informed in writing at the time of sale. A separate measure, AB 1534, meanwhile, stipulates that "buy here pay here" dealers affix and prominently display the reasonable market value of used cars offered for retail sale. Additionally, the buyer must be given a copy of the information that the dealer used to determine the value of the vehicle.
- Report: Predatory Auto and Student Loans Still Targeting Latinos
NBC Latino 14 Dec 2012
With student loans and auto financing, many Latino families are being steered toward riskier options, concludes a new report from the Center for Responsible Lending (CRL). With car loans, for example, those with low credit scores or incomes can only apply for an online loan with a questionable lender or accept financing through the car dealer -- making them more vulnerable to yo-yo scams, in which the dealer changes the terms of the initial loan but will not refund money to borrowers that do not agree. CRL's Graciela Aponte notes, "Many of these predatory lenders are targeting Latinos, or other minorities and military families. Unfortunately you do have people looking to offer some families the worst, higher-fee products, so you have to be on the lookout.” In 2009, car buyers paid $25.8 billion in additional interest due to a dealer “markup.” In some states, 79 percent of consumers were unaware that dealers could mark up rates without their consent. Some dealers use “loan packing,” where they “pack” the loan with other costs, such as a car service contract, which can add almost $1,800 to the price tag. With student loans, meanwhile, the average student graduates with about $25,000 in debt; in 2008, 8 percent of Latinos had debt of over $40,000, the CRL report found. Although there is less risk with federal loans, 40 percent of families do not use up their federal student loan eligibility. CRL has called on some reforms to protect families, such as encouraging schools to certify that students have exhausted their ability to get federal and state loans before taking out private loans and providing more loan counseling for student and families.
- The State of Lending: Progress & More Work
Huffington Post 10 Dec 2012
The Center for Responsible Lending (CRL) on Dec. 12 will launch the first in a series of reports on the impact of predatory lending in consumer markets, confirms CRL Executive Vice President Ellen Schloemer. The reports, under the umbrella of "The State of Lending in America and its Impact on U.S. Households," will cover mortgages, auto loans, credit cards, and student loans. Schloemer notes that there has been a record of strong reforms that help consumers regarding mortgage lending and credit cards. However, abuses in auto financing and student loans continue. Car dealers earn more when they encourage consumers to take out loans at higher rates than the consumer qualifies for; while students often turn to private loans even when they are eligible for cheaper, federal student loans. Future CRL reports will also look at payday and car title loans, checking account overdrafts, and debt collection.