The Justice Department has subpoenaed another subprime auto lender as it extends its investigation into the industry.
Consumer Portfolio Services in Irvine, Calif., disclosed in aregulatory filing dated Thursday that it received a civil investigative subpoena from the Justice Department on Jan. 14 requesting documents related to its auto lending and securitization.
This week's subpoena is the latest issued by federal investigators who are deepening their investigation into auto lenders' underwriting and origination standards, representations and warranties.
The Federal Trade Commission alleged last year that Consumer Portfolio Services violated federal law in practices ranging from loan servicing to debt collection to credit reporting. CPS agreed to pay $5.5 million to settle those claims, the parties announced in May 2014.
Other regulators and law enforcement agencies, including the Consumer Financial Protection Bureau, have settled allegations against lenders in the past year, as well. First Investors Financial Services Group paid a $2.8 million fine to the CFPB over alleged distortions of consumer credit records.
Other subprime lenders to have received similar subpoenas include GM Financial, Santander Consumer USA, and Ally Financial. Investigators have requested documents tied to loans originated as far back as 2007.
Auto executives and bankers involved in their securitizations say auto credits have held up well by historical standards, despite gradually higher losses.
"The rise in auto loan delinquencies in the third quarter for independent finance companies, which lend primarily to subprime borrowers, reflects the lenders' gradual credit expansion rather than an overheating subprime lending market," Moody's Investors Service said this month.
Annual net losses on subprime auto securitizations climbed to 7.96% in November, the highest level in over four years, Fitch Ratings data show.
Auto lenders issued $22 billion in securities backed by subprime credits last year, making 2014 the best year for such deals since the financial crisis. Total auto asset-backed security supply rounded out to $87 billion, according to JP Morgan Securities.