In response to escalating vehicle prices, the Consumer Financial Protection Bureau (CFPB or Bureau) published a blog post on February 24 that covered a variety of auto loan problems. According to data from the Bureau of Labor Statistics, the consumer price index for used vehicles and trucks has increased by 40% since January 2021, while the consumer price index for new cars has increased by 12 percent. As a result of these developments, the Consumer Financial Protection Bureau anticipates that the overall amount of debt and the average loan size will continue to rise.( https://complextime.com/low-income-canadians-turn-to-installment-loans-amid-pandemic/ )
Promoting transparent competition
In response to these significant price adjustments, the CFPB’s blog post explains three primary ways in which the Bureau wants to promote a fair, transparent, and competitive automobile loan market:
- Providing vehicle loan customers with cheap credit like from Payday Champion;
- Practices in auto loan service and collection are being closely scrutinized; and
- Increasing the level of competition among subprime lenders.
In particular, the Customer Financial Protection Bureau (CFPB) intends to monitor lending structures and consumer outcomes, particularly those in which lenders rely on high interest rates and fees even in the case of consumer default.
Concerned about a return to the trend of rising LTV ratios
The CFPB demands that service providers make accommodations available to all customers;
It intends to collaborate with other government authorities to guarantee that service members receive proper treatment.
The employment of technologies, such as GPS positioning devices and license plate recognition technology, may have a disproportionate influence on particular populations and may also result in privacy concerns; and
The body wishes to better understand potential barriers to entry into the subprime market. It hopes to collaborate with the Federal Trade Commission and the Federal Reserve Bank Board of Governors to address concerns that arise in the industry.
The Consumer Financial Protection Bureau’s blog article serves as a timely reminder that auto lending is still on the Bureau’s radar. It also provides an insight into the types of issues that the Consumer Financial Protection Bureau (CFPB) will be investigating in the car loan sector under Director John Smith.