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Managing Rising Consumer Debt

Brien Joyce Vice President EFG Companies
Contributing Author:
Brien Joyce
Vice President
EFG Companies

The data says it all. According to Euromonitor and JATO, between 2009 and 2016:

  • U.S. consumer spending on vehicles grew by 36 percent
  • The outstanding balance of consumer auto loans increased by 36 percent
  • Disposable income only grew 15 percent
  • The outstanding balance of consumer loans as a whole decreased by 7 percent
  • The average auto debt per car in circulation rose by 44 percent

Everyone knows that since 2009, auto manufacturers and lenders aggressively pursued unit sales and loan volume. Manufacturers have hit a peak when it comes to providing deep incentives, while lenders loosened credit standards, increased terms, and dove into the deep-subprime space.

Morgan Stanley recently reported that the percentage of deep subprime loans rose from 5.1 percent in 2010 to 32.5 percent in 2017.

Now dealers, manufacturers, and lenders are beginning to see what the other side of this rapid expansion looks like. Sales are plateauing regardless of dealer or manufacturer incentives. Defaults and delinquencies are up, and loan originations are on the decline.

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Enterprise Financial News Volume 14

Lender Blog EFN CoverHot Off The Press

Get a new perspective on how to maximize your loan volume while staying compliant with the experts from EFG Companies.

EFG Companies knows how to give your institution the edge in the marketplace. Contact us today to put our knowledge, expertise and product innovation to work.

Download the 14th volume of Enterprise Financial News Magazine

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CFPB – A Year in Review

Steve Roennau Vice President Compliance EFG Companies
Contributing Author:
Steve Roennau
Vice President
Compliance
EFG Companies

A lot has happened with the Consumer Financial Protection Bureau (CFPB) in the past year. From large settlements to court rulings, the CFPB brought itself under the spotlight.

Let’s start at about this time last year. The House of Representatives passed H.R. 1737, the “Reforming CFPB Indirect Auto Financing Guidance Act” with a strikingly majority vote of 332-92. The piece of legislation would direct the CFPB to amend how it issues guidance to indirect auto lenders by:

  • providing a public notice and comment period before issuing the guidance in final form;
  • making publicly available all information relied on by the CFPB, while also redacting any information exempt from disclosure under the Freedom of Information Act;
  • consulting with the Board of Governors of the Federal Reserve System, the Federal Trade Commission, and the Department of Justice; and,
  • study the costs and impacts of the guidance to consumers, as well as women-owned and minority-owned small businesses.

In addition, the bill would nullify the CFPB’s “Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act Bulletin”. This bulletin instructed lenders to either eliminate dealer pricing discretion, or constrain dealer pricing discretion by monitoring dealership practices and using “controls” to force dealerships to adjust their practices.

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