The Consumer Financial Protection Bureau (CFPB) Wednesday announced it is proposing to oversee larger nonbank auto finance companies for the first time at the federal level.
“Many people depend on auto financing to pay for the car they need to get to work,” said CFPB Director Richard Cordray. “Nonbank auto finance companies extend hundreds of billions of dollars in credit to American consumers, yet they have never been supervised at the federal level. We took action after we uncovered auto-lending discrimination at banks we supervise. Today’s proposal would extend our oversight, allowing us to root out discrimination and ensure consumers are being treated fairly across this market.”
In conjunction with the proposed rule, the CFPB released a supervision report that details the auto-lending discrimination that the Bureau has uncovered at banks. The report highlights that the Bureau’s supervisory actions against banks will result in about $56 million in redress for up to 190,000 consumers harmed by discriminatory practices.
Currently, the Bureau supervises large banks making auto loans, but not nonbank auto finance companies. Today the CFPB is proposing to extend its supervision authority to the larger participants of the nonbank auto finance market. Under the Dodd-Frank Act, the CFPB has authority to supervise certain nonbanks the Bureau defines through rulemaking as “larger participants” in a market.
The proposed rule would generally allow the CFPB to supervise nonbank auto finance companies that make, acquire, or refinance 10,000 or more loans or leases in a year. The Bureau estimates that about 38 auto finance companies would be subject to this new oversight. These companies originate around 90 percent of nonbank auto loans and leases, and in 2013 provided financing to approximately 6.8 million consumers.
The CFPB said that any new proposed rules and supervisory activity would focus broadly on three areas:
- Fairly marketing and disclosing auto financing: The Bureau wants to make sure that auto finance companies who market directly to consumers are not using deceptive tactics to market loans or leases. The Bureau is also looking to ensure that consumers are getting terms they understand and accept.
- Providing accurate information to credit bureaus: The Bureau wants to make sure that information provided to the credit bureaus is accurate.
- Treating consumers fairly when collecting debts: The Bureau wants to make sure that auto finance companies are not using illegal debt collection tactics. The Bureau has received complaints from consumers who say that their autos have been repossessed while they are current on the loan or have a payment arrangement in place. The Bureau also is looking to ensure that collectors are relying on accurate information and using legal processes when they collect on debts or repossess autos.
The proposed rule is open for comment for 60 days after the rule is published in the Federal Register.