Earlier this summer, the Consumer Financial Protection Bureau (CFPB) shared its initial findings from the Auto Finance Data Pilot, an initiative designed to monitor the auto loan market for consumer risks. The pilot involves collecting data from nine large auto lenders, representing a cross-section of the market. The CFPB found that consumers who financed negative equity from a prior vehicle into a new auto loan were more likely to have their account assigned to repossession, larger auto loans, lower credit scores, lower income, and longer loan terms.
Some consumer advocate groups have urged the bureau to go farther, capturing auto lending data on buy-here/pay-here dealerships and predatory lending targeting military servicemembers. According to a letter sent to the bureau, the Consumer Federation of America, the National Consumer Law Center and Americans for Financial Reform Education Fund urged the bureau to do the following:
- collect data on auto financing from credit unions, so that the Bureau can compare outcomes of consumers who financed directly with a credit union with similarly situated consumers who obtained an “indirect loan” from a credit union through a dealership
- expand the data collection requirements to apply to “Buy Here Pay Here” dealerships, and to evaluate their use of pre-dispute arbitration agreements, as the Consumer Groups believe that these dealerships may cause consumer harm that goes unchecked
- collect data concerning auto leases to ensure that dealers pass tax credits on to consumers who lease clean vehicles
- collect data related to “language access, including language preferences, ease of accessibility, translation efforts, and other customer service practices.”
Consumer advocacy is a good thing, and there has been a significant increase in auto lending complaints to the CFPB in 2024. In 2023, complaints related to vehicle loans and leases surged by 46.3 percent compared to the previous year, driven primarily by issues with billing, fees, and fraud. While the bulk of these complaints target unscrupulous lenders, the stain covers the entire auto lending industry.
And now is the time for consumers to have confidence in their lenders. Credit unions in July had one of their worst months as auto loan portfolios fell at the largest annual rate since at least August 2014, according to data from America’s Credit Unions trade group data.
Compliance sells
While it might not seem intuitive, communicating about consumer compliance truly can set your credit union apart from other lenders. Consumers are increasingly concerned about threats to their data, privacy, and efforts to defraud them of their hard-earned income. According to an Experian report, over half of consumers feel they’re more of a fraud target than a year ago. If the high price of vehicles – and the interest rate – wasn’t enough to hit pause on a purchase, the nagging concerns surrounding security can be enough to stop the consumer in their tracks.
Consumers trust their lender as a partner, protecting their data, privacy and income, and double-checking that the dealer has the same level of oversight. That level of confidence equals return business and member referrals.
We encourage our lender clients to work closely with their dealer partners to ensure that their policies and procedures address all federal, state and local compliance regulations. EFG Companies offers a compliance health check for dealers, including a risk assessment and analysis to determine any gaps or areas of risk.
With more than 50 years of experience, we’re more than an F&I provider, we’re your business partner and can be a valued resource to your credit union. Contact us today to learn more about how our team can help you achieve your compliance goals.