CFPB Scrutinizes Auto Lending, Repossessions, and Collections

On February 24, 2022, the CFPB announced it published a blog regarding auto lending. This announcement was followed by a February 28, 2022 press release in which the CFPB stated it was moving to “thwart illegal auto repossessions.” 

Since the cost of automobiles continues to increase, the CFPB expects the total amount of debt and the average loan size to increase, putting additional pressure on consumers’ budgets. Further, due to the high price for used cars, the CFPB is concerned that lenders and servicers might be incentivized to repossess cars. The CFPB is particularly concerned about potential incentivization since, in previous examinations and enforcement actions, they observed illegal seizure of cars, sloppy record-keeping, unreliable balance statements, and ransom for personal property found in vehicles. 

The CFPB is also interested in preventing disparate impacts on minority communities. In its view, the current economic recovery is uneven, and some consumers have been hit harder economically due to the pandemic. The CFPB is also concerned that technology used by lenders to repossess cars more quickly may disproportionately impact minority communities. 

To prevent wrongful repossessions, the CFPB says it will take action against illegal repossessions and sloppy servicing of auto loans. CFPB Director Rohit Chopra remarked, “With today’s high car prices, auto lenders and investors might be tempted to seize vehicles for resale in the hot used car market,”... No American ever wants to wake up to see their car stolen. Auto loan servicers need to ensure that every repossession is lawful.”

insideARM Perspective:

This announcement from the CFPB came within the same week that the CFPB officially announced its focus on medical debt. The CFPB seems to be targeting those areas in which it perceives consumers, particularly minority consumers, are the most vulnerable. While this aim is good, the CFPB’s rhetoric and inflammatory language to describe debt collectors is concerning. 

Debt collection is crucial to this country’s financial and credit ecosystem. ARM entities spend significant time, energy, and money to comply with state and federal laws. The vast majority are mindful of their impact on consumers and collect debt in the right way. While bad actors certainly exist, as they do in any industry, they are the exception and not the rule. The phrasing of the CFPB’s most recent press releases seem to imply that bad actors are the norm and debt collectors are inherently bad.  

Over the years, the debt collection industry has opened its proverbial (and sometimes literal) doors to the CFPB so they can understand the industry they are trying to regulate. While some have said no good deed goes unpunished, most debt collectors have agreed that providing the CFPB insight goes a long way in preventing unintended negative consequences to consumers. The inflammatory language used by the CFPB recently, and the implication that debt collectors are bad actors seeking to take advantage of the poor, has the potential to break down the lines of communication between the industry and the CFPB. Such a breakdown will ultimately hurt consumers.