Who's Who in Auto Lending Investigations
November 6, 2014 7:30 AM
As U.S. auto lending has boomed, the industry especially its subprime sector has become a growing target for a slew of prosecutors and regulators. Here are seven government agencies to keep an eye on.
(Image: Bloomberg News)
Justice Department Probe
The Justice Department has slapped GM Financial and Santander Consumer USA with subpoenas seeking information about the underwriting and securitization of subprime auto loans, according to August disclosures by the two companies. The probe is being led by Preet Bharara, the U.S. attorney for the southern district of New York.
(Image: Bloomberg News)
SEC Territory
The Securities and Exchange Commission, led by Mary Jo White, has opened an inquiry of Ally Financial's subprime auto finance business, the Detroit lender revealed on Oct. 31.
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Big Apple's Bite
In April, the New York Department of Financial Services sued a subprime auto lender, Condor Capital Corp., accusing the firm of stealing millions of dollars from its customers. The suit relies on a little known provision in the Dodd-Frank Act that allows Superintendent Benjamin Lawsky and his fellow state regulators to sue lenders over alleged deceptive, abusive or unfair practices.
(Image: Bloomberg News)
Second Bite by the Big Apple
The New York District Attorney's Office has sent a subpoena to Capital One Financial regarding its subprime auto lending business, according to a Nov. 3 securities filing. That same office, headed by District Attorney Cyrus Vance, has also subpoenaed Capital One as part of a money-laundering probe.
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The Ubiquitous CFPB
The Consumer Financial Protection Bureau, led by Richard Cordray, reached a $98 million settlement with Ally Financial last December after finding that African-American car buyers paid more in interest on auto loans than similarly situated white borrowers. The CFPB has also said that settlements with other auto lenders will provide roughly $56 million in additional redress to minority borrowers who paid higher interest rates.
In addition, the CFPB wants to start supervising the nation's 38 largest nonbank auto lenders, in a move that the agency says would create a level playing field for consumers by subjecting nonbank lenders to the same rules and oversight as banks.
(Image: Bloomberg News)
OCC's Engine Light
For nearly a year, the Office of the Comptroller of the Currency, led by Thomas Curry, has been issuing warnings about weakening credit standards in auto lending.
The agency's most recent salvo came in an Oct. 28 speech by Darren Benhart, the OCC's deputy comptroller for supervision risk management. He voiced concern about longer loan terms and a drop in the borrowers' equity in their vehicles. "The results have yet to show large-scale deterioration at the portfolio level," Benhart said, "but we are definitely seeing the signs of increasing risk."
(Image: Bloomberg News)
FTC Still on the Road
The Federal Trade Commission, currently led by Edith Ramirez, has traditionally had oversight over the auto sales business. And despite all the recent actions by other agencies, the FTC is still bringing auto-lending cases.
In a settlement announced by the FTC in May, subprime lender Consumer Portfolio Services, Inc., agreed to pay more than $5.5 million over allegations that it used illegal tactics to service and collect loans.
(Image: Bloomberg News)
