Trump Administration | Lending Curve

Contributing Author:
Brien Joyce
Vice President
EFG Companies

We’re halfway through a very interesting year in the auto-lending space. If you had planned for slightly lower auto loan volume, rising delinquency rates, and an uncertain economic outlook, congratulations! You’ve planned for this situation and hopefully are managing well. Going forward, you’ll need to stay the course. The forecast for the second half of this year and all of 2020 appears to be equally bumpy.

The Economy and Vehicle Prices

On June 19^th, the Federal Reserve chose to keep interest rates steady in the near term, but retained an option to cut rates as economic risks mount and inflation remains stuck below their target. Many officials on the Fed’s policymaking committee expect to lower rates before the end of the year amid continuing trade tensions and slowing global economic growth. Essentially, the Fed is preparing for the economy to take a hit and is keeping an interest rate ace up their sleeve.

There are other indicators of a stalling economy. A subdued global economy, increased corporate stock buybacks, and some spikes in lay-offs will keep business bumpy throughout 2019 and into 2020. Significant peaks and valleys in the stock market have caused unrest. The good news is a recession may still be a few years off. In fact, a brief inversion in Treasury notes prompted investors to predict another recession in two to three years.

Contributing Author:
Steve Roennau
Vice President
Compliance
EFG Companies

The Consumer Financial Protection Bureau (CFPB) had a busy first quarter defending itself. In the process of appealing the ruling from the U.S. Court of Appeals for the District of Columbia calling the CFPB “unconstitutionally structured,” the Department of Justice (DOJ) and 15 state Attorneys General joined the fray of government entities agreeing with the initial ruling.

The DOJ told the D.C. Circuit Court that the ruling should be upheld in its entirety, including the remedy to give President Trump full authority to remove the CFPB’s director at will. Just recently, the American Financial Services Association (AFSA) has joined the call to curb CFPB authority when they submitted a list of suggested regulatory reforms to the Trump administration. At the top of their list, was, of course, a halt to CFPB examinations and a moratorium on the use of disparate impact theory.

Lastly, in the case of Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., the Supreme Court ruled that Congress specifically intended to include disparate impact claims in the Fair Housing Act, but required plaintiffs to prove that a defendant’s policies could cause disparity. This ruling has significant implications for the CFPB in terms of how it determines disparate impact in auto finance.