Justice Department Subpoenas GM Over Subprime Auto Loans

August 5, 2014
Washington Post 
auto financing news
The Justice Department has served General Motors Financial with a subpoena demanding documents related to underwriting criteria for subprime auto loans it made and securitized since 2007. The subpoena -- connected to an investigation into possible violations of the Financial Institutions Reform, Recovery, and Enforcement Act -- also requested information on the representations GM made about the criteria when the loans were bundled into securities.

The auto industry is depending more on subprime auto loans for growth. New auto loans to borrowers with the lowest credit scores increased 51 percent in the first quarter of 2014, compared to a year earlier, Experian Automotive reported. New auto loans to borrowers with the highest credit scores were down 7 percent in the same period.

The Office of the Comptroller of the Currency warned in June that “signs of risk in auto lending are beginning to emerge,” based on an assessment of lenders’ willingness to lengthen terms, pursue borrowers with lower credit scores, and offer loans that exceed the value of the vehicle.

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