In February 2023, the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) announced an auto finance data pilot, where it ordered nine large auto lenders to provide information about their auto lending portfolios. These lenders consisted of banks, finance companies, and captive lenders (manufacturer-owned finance companies that generally provide below-market interest rate auto financing to consumers). The Bureau said that it planned to use this information to build a data set that provides insights into lending channels, loan performance, and inform potential future data collection efforts. In fact, earlier this year, the CFPB published a notice in the federal register that it sought approval from the Office of Management and Budget (“OMB”) for the collection of auto finance data pursuant to its authority under the Dodd-Frank Act. To date, OMB has not made a decision on this request.
In June 2024, the CFPB released its first findings from this data pilot. In this report, the CFPB found that consumers who financed negative equity from a prior vehicle into a new auto loan were more likely to have their account assigned to repossession, larger auto loans, lower credit scores, lower income, and longer loan terms. The Bureau concluded the report by showing that financing negative equity from a prior vehicle will likely lead to additional consumer stress. The Bureau also concluded that outcomes for these individuals will be worse than for individuals who do not finance negative equity. At the time, the CFPB stated that it planned on more closely examining this data and lender use of negative equity financing.
On August 5, 2024, three consumer advocacy groups, the Consumer Federation of America, the National Consumer Law Center, and Americans for Financial Reform Education Fund (collectively, the “Consumer Groups”), sent a letter to the CFPB to show their support of the auto finance data pilot and to encourage the CFPB to release more information that the Bureau has already obtained from the data pilot and to expand the amount of data collected from the data pilot.
The Consumer Groups praised the CFPB on the data it has collected and released, noting that the information from this data program has provided much more detail on negative equity financing than has otherwise been available from other sources. In addition to the data it has already released, the Consumer Groups urged the CFPB to release data on military service-members, add-on products, repossessions, and payments between dealers and finance companies.
The Consumer Groups also urged the CFPB to expand the data it collects from the auto lenders to several different categories of auto lending. Specifically, the Consumers Groups asked the CFPB to:
- collect data on auto financing from credit unions, so that the Bureau can compare outcomes of consumers who financed directly with a credit union with similarly situated consumers who obtained an “indirect loan” from a credit union through a dealership
- expand the data collection requirements to apply to “Buy Here Pay Here” dealerships, and to evaluate their use of pre-dispute arbitration agreements, as the Consumer Groups believe that these dealerships may cause consumer harm that goes unchecked
- collect data concerning auto leases to ensure that dealers pass tax credits on to consumers who lease clean vehicles, as the dealers often claim they do
- collect data related to “language access, including language preferences, ease of accessibility, translation efforts, and other customer service practices.”
We expect that the CFPB will continue to publish reports based on the data it obtained through this data pilot. It is also likely that the Bureau will expand on the data that it collects from auto lenders, and this letter could provide an initial look at what actions the CFPB could take to further expand the auto finance data pilot.