Under the rule [PDF], the CFPB will be allowed to supervise auto financing companies that makes, acquire, or refinance 10,000 or more loans or leases in a year.
Auto loans currently account for nearly a trillion dollars in outstanding debt in the U.S., and that’s not including car leases, which make up more than a quarter of new car purchases.
The 34 non-bank financing businesses that will fall under the CFPB’s umbrella are responsible for about 90% of all non-bank auto loans and leases, representing nearly 7 million borrowers a year.
CFPB oversight will make these non-bank financing companies accountable for complying with federal consumer financial laws, including the Equal Credit Opportunity Act, the Truth in Lending Act, the Consumer Leasing Act, and the Dodd-Frank Act’s prohibition on unfair, deceptive, or abusive acts or practices.
For example, the CFPB can investigate whether a finance company is using deceptive tactics, like misleading borrowers or confusing them about the terms of their loans or leases.
The Bureau will also assess whether finance companies are providing accurate information about borrowers to the various credit bureaus. In 2014, the CFPB took action against an auto finance company in Arizona for, among other problem, making inaccurate claims to the credit reporting agencies.
Debt collection is always an issue with auto financing, and the CFPB says it wants to make sure that borrowers are treated fairly by collectors. This includes looking into the practices of third-party repossession operations.
“Auto loans and leases are among the most significant and complex financial transactions in a typical consumer’s life,” said CFPB Director Richard Cordray. “Today’s rule will help ensure that larger auto finance companies treat consumers fairly.”
by Chris Morran via Consumerist
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