Jun 10, 2013 Philip Burgess
Auto finance in the United States is heating up, as consumer credit for auto loans hit high marks early in 2013. According to Equifax, $69.6 billion in auto financing was provided to American auto buyers from lending outlets in January and February of this year. The source noted that it is highest lending mark recorded in eight years. Also, it's a 70 percent increase from the $40.2 billion borrowed during the first two months of 2009, a recession low.
Approximately 3.5 million loans were successfully applied for during January and February of 2013, which was also an eight year high. Overall, there are currently 59.8 million outstanding auto loans in the U.S., Equifax stated.
Although there has been significant growth in auto lending, the number of late payments has been shrinking, a positive development for auto financiers. The source noted that the rate of serious delinquencies on car loans funded by financial outlets declined by 15.4 percent from the April 2012 mark. Loans that originated from banks also saw a year-to-year decrease in serious delinquencies by 9.1 percent.
House members request enforcement details
Despite record levels of lending, auto finance firms may be tasked with complying with additional regulations and some members of the House Financial Service Committee want clarification on how compliance can be accomplished.
According to Bloomberg, 13 House Democrats sent a letter to the Consumer Financial Protection Bureau (CFPB) requesting information related to its investigation of discrimination among auto lenders. In March, the CFPB published guidelines for lenders to avoid discriminatory practices. However, it appears that lawmakers want more clearly stated policies regarding the enforcement and adherence of the new regulations.
The source noted that President of the National Association of Minority Automobile Dealers Damon Lester also called for the CFPB to be more transparent regarding its investigation. He stated that the agency has yet to share details of its analysis of the auto lending industry and has not openly discussed how the regulations could affect both consumers and lenders.
Some financial institutions have already received warnings over alleged discrimination, Bloomberg reported.
Central to the CFPB ruling are dealer mark up practices. This is when indirect auto lenders allow car dealers to increase the loan buy rate that a lender has established. Often, dealers can be compensated for doing so under such policies, according to the CFPB. The agency suggests that lenders eliminate mark up policies to prevent possible discrimination.