Trump Administration Considers Limiting CFPB’s Oversight Of Auto Lenders

A potential rule change by the Trump administration could limit the Consumer Financial Protection Bureau’s oversight of auto lenders, including many that focus on buyers with low credit scores.

Right now, the CFPB can investigate any company that originates 10,000 or more car loans a year. But in August, it asked for public comment on potentially raising that threshold to as high as 1 million, which would exclude all companies that lend to subprime borrowers from its oversight.

The move comes as a rising number of borrowers are falling behind on their car loans.

Right now, the CFPB can, if it wants, examine any of about 63 different auto lenders that fall under its supervision. An examination “is like an audit or an inspection or investigation of a company,” said Lorelei Salas, who was the director of supervision at the CFPB until February of this year.

Companies that are examined by the CFPB are given time, Salas said, to fix any of their practices that violate consumer protection laws — and the whole process is kept private.

“It tends to be a very collaborative process, and it tends to actually have really great outcomes for consumers,” she said.

Last year, for example, the CFPB ordered some auto lenders to stop seizing vehicles from consumers who had made payments to prevent their cars from being repossessed. But groups that represent auto lenders say the supervision process is a burden and a cost, especially to smaller businesses.

“It’s an enormous amount of money,” said Patrick O’Brien, director of government relations at the National Independent Automobile Dealers Association. “And it’s just, it’s a huge undertaking that, frankly, we believe would be better utilized focusing on the consumer experience.”

Plus, auto lenders are also overseen by states and the Federal Trade Commission. The CFPB joined in on supervising the industry just 10 years ago, according to Philip Bohi, general counsel of the American Financial Services Association.

“Our contention is they were adequately supervised prior to the imposition of this larger participants’ supervision, and imposing it has just been duplicative and burdensome,” he said.

But consumer advocates say this is the wrong time to pull back oversight of auto lenders —especially ones that specialize in lending to buyers with low credit scores. In the last few months, a large lender that catered to subprime borrowers abruptly went bankrupt amid allegations of fraud. According to the company VantageScore, delinquencies on car loans have also been on the rise for years.

“So this area that is clearly experienced such trouble right now, where we’re seeing such evidence of fraud and abuse, and where so many consumers are being harmed, and where there’s such an increase in defaults and repossessions would have no supervision,” said John Van Alst, a senior attorney at the National Consumer Law Center.

The CFPB did not respond to an interview request. The public comment process on its potential rule change closed in late September.