CFPB's No. 2 Drops Big Hints on Changes for Auto Loans and Complaints

ORLANDO — Subprime auto lending has surfaced as a top priority for the Consumer Financial Protection Bureau, the agency's No. 2 warned on Wednesday.

Speaking to an industry conference, CFPB Deputy Director Steven Antonakes also said that the agency was open to making changes to its complaint portal, which the regulator recently said would allow consumers to post detailed narratives of their problems with financial institutions.

But his most surprising remarks concerned subprime auto lending, which he said is now one of the "emerging risks" that the CFPB is closely watching after a loosening of credit availability drove up car prices.

"The average term of a subprime auto loan for a new vehicle has increased every year since the crisis and is now at a length never seen before," Antonakes said at the Consumer Bankers Association's annual conference here. "At the same time, we have seen credit losses for recent loan vintages over the past two years rising from historically low levels, and some preliminary analysis suggests high levels of early delinquencies.

"Combined, these trends cause us to worry that subprime borrowers are being extended credit that they are unable to pay back. Given the potential for harm to consumers, we will be keeping a close eye on these trends to address, as necessary, potentially unfair, deceptive, and abusive practices in this space."

The CFPB has gone after certain areas within the auto market like add-on products and potential fair lending violations. But Antonakes' remarks hinted at a much broader sweep of concerns for the entire subprime auto loan market.

Antonakes also suggested that he would be open to some changes on the CFPB's complaint portal. The CFPB recently finalized a rule that allows consumers to post detailed accounts of their complaints — a move that came after staunch opposition from the industry.

Part of the industry's concern is that the CFPB allows companies to respond to the complaint but only by picking one of the nine pre-written answers that the agency allows. There is not an option for the companies to create their own response to be published. This is one area that Antonakes said officials are willing to discuss with the industry.

"We're still open to taking feedback on appropriateness and relevance of those drop-down [response options] and we will go forward and see how it goes. But again, a partnership and relationship is very important to us," he said. "While we have decided to go forward with the narratives, it is a very open process and we will continue improving that process over time."

Another area that Antonakes said the agency would still take feedback is the mortgage disclosure rule that takes effect in August. When asked whether they could extend the deadline if vendors were not ready, Antonakes surprisingly indicated that could potentially happen.

"To the extent there is new information or we're hearing directly from vendors that folks aren't going to be ready … we should continue to talk about that," he said. "I can't promise you [changes], but to the extent we will have a better understanding of the concerns, that is something we will consider."

However, a CFPB spokesman later said the agency has "no plans to delay the deadline on the new mortgage disclosure forms. The industry should be prepared to begin using the new forms for loans with an initial application submitted on or after August 1. The Deputy Director was pointing out that the Bureau is open to considering new information from stakeholders, not to delaying the deadline."

Antonakes' remarks largely centered on the exam and enforcement process, and how the agency is structured. But he ended on a somewhat odd note, asking for people with financial expertise to apply for a job at the CFPB, which, he said, is always looking for experienced employees.

"With that said, I will offer, without apology, that if you are passionate about consumer finance, the best place to work is the Consumer Financial Protection Bureau," said Antonakes, receiving a laugh from the audience. "I cannot promise you that the experience will be without challenge or frustration, but I can promise you that it will be the most fulfilling work of your career."

The CFPB is expected to make more news on Thursday when it unveils how it may craft new rules restricting payday lending. President Obama is also scheduled to give a speech on the topic when he visits Alabama, one of the states where payday lending is highly prevalent.

Speaking at the White House on Wednesday, Press Secretary Josh Earnest effectively acknowledged there was a connection between the two events, but denied suggestions that it showed the CFPB was not independent from the administration.

"Obviously, it is possible for the CFPB to be completely independent but also have the person who's responsible for the creation of the CFPB to be proud of their work," Earnest told reporters.

He declined to say whether Obama was personally worried about the increase in payday lending, saying only that there have been "widespread reports of concerns" that "have been raised about some of this activity."

"And the president who, himself, is an advocate for middle-class families, I think notices when those kinds of stories are told and when those kinds of reports are filed," Earnest said.