Leading Democrats on the U.S. Senate banking committee last month raised concerns on how the Consumer Financial Protection Bureau is investigating potential abusive lending practices of auto finance companies.
In a March 12 letter from Sherrod Brown, D-Ohio, and Elizabeth Warren, D-Mass., the committee members asked CFPB for details on how the agency is monitoring the auto lending market, as financial markets have become “increasingly unstable” in the midst of the coronavirus outbreak.
The letter noted the CFPB has not taken any enforcement action against an auto lender in the two years since executive director Kathy Kraninger, a Trump administration appointee, took over the bureau in late 2018.
“Aside from noting the existence of certain abusive auto lending practices outlined in the Bureau’s Supervisory Highlights, the CFPB has not issued a comprehensive report on this issue since 2017, and has not taken a single enforcement action against any auto lenders since 2018,” the senators wrote.
“While the agency does not have the authority to examine directly the practices of auto dealers, it does have the authority — and the responsibility — to examine the auto lending companies and financial institutions that provide loans.”
The letter noted that auto loan debt is the second largest category of non-housing debt behind student loans. At the end of 2019, consumers held over 115 million auto loan contracts with balances totaling $1.33 trillion, according to Warren’s office.
Brown and Warren asked Kraninger whether auto dealers’ arrangements with lenders pose risks to consumers and how the CFPB deals with problematic arrangements. They asked how the CFPB determines whether underwriting practices present risks to consumers and if the agency maintains a database on loan durations and default rates for specific lenders.
After the CFPB recently defined its framework for determining if certain activity is “abusive,” Brown and Warren asked Kraninger how the agency will evaluate whether an auto lender is engaged in an abusive practice.
The senators also asked whether the CFPB is evaluating auto lenders’ compliance with fair lending laws.
And the senators are asking Kraninger how the CFPB evaluates and prioritizes risks to consumers in auto lending and how many consumer complaints the agency has received related to auto lending practices.
Brown and Warren asked Kraninger to respond to their questions by March 26.
