Auto Loans

Cars are the most common nonfinancial asset held by American families, and for some families, their most significant asset. Cars have become a necessity for U.S households, with more than 85% of the U.S. workforce using an automobile to commute to work. Car ownership is no longer a luxury but is a prerequisite to economic opportunity. The need for a car is particularly true for many low- and moderate-income families (LMI) and communities of color, who live or work beyond the reach of public transit systems. Given the role that cars play in the everyday lives of American families, we applaud...

A letter from seventeen consumer and civil rights advocacy groups to investor and auto dealer, Warren Buffett, urging him to help end discriminatory auto lending practices in this country. In 2014, Mr. Buffett's Berkshire Hathaway purchased the largest privately-held auto dealership group in the nation, the Van Tuyl Group. This letter calls attention to the widely documented problem of "racially motivated and discriminatory auto dealer markups."

CRL responded to the House Financial Services Committee report on the CFPB and Indirect Auto Lending. We address this response in a letter to House Financial Services Chairman Hensarling and Ranking Member Waters dated and sent on 12/9/15. In the HFSC Report, several assertions are made about indirect auto lending, including arguments opposing CFPB data methodology and an argument that disparate impact is not cognizable under the Equal Credit Opportunity Act (ECOA). In our response we address the claims made by the HFSC report.

H.R. 1737 hides its intent behind a smokescreen of claims about process and regulatory jurisdiction. However, the bill is really about the unfair and discriminatory impact of car dealer interest rate markups. The bill seemingly targets guidance the CFPB released in March 2013 putting lenders on notice that it had evidence of discrimination in car loans held in lenders’ portfolios and gave assistance to lenders on how to avoid fair lending risk going forward. The bill is a misguided attack on the CFPB’s enforcement of anti-discrimination laws.

For the vast majority of car loan borrowers, car dealer interest rate mark ups make their loans unnecessarily more expensive than if a flat fee compensation system were in place. This is the finding of a review of recent industry data by the Center for Responsible Lending. In a recent study, Charles River Associates suggested that if the CFPB required lenders to pay dealers through a flat rate compensation system, the cost to borrowers would outweigh the benefits of eliminating discriminatory impact. However, a closer review of the data and the assumptions that Charles River Associates used to...

A new policy brief released today by the Center for Responsible Lending provides a state-by-state snapshot showing predatory payday and car title lenders increasingly moving into installment loans. The lenders are continuing to offer unsafe loans with excessive interest rates, which are carefully designed to trap borrowers in a cycle of debt they cannot escape, and actively seeking to expand into new states. The report highlights that just because lenders are making an installment loan, it is no guarantee that it is a safe loan. The report makes recommendations to regulators and policymakers...

See details below about 2015 NC General Assembly bills: Senate budget bill would repeal State Fair Housing Act Bill to legalize 80 to 125% loans still stalled Bill to roll back debt collection protections also stalled Ratified bill reduces protections against harassing calls Wage garnishment put into study committee bill Bills to reduce protections against mortgage broker abuses have not passed Because of your quick action, bills to invite high-cost lenders into our state and eliminate protections against debt collection abuses are stalled. But the Senate budget bill proposes to repeal our...

H.R. 1737 would frustrate efforts to crack down on discriminatory auto lending practices. The bill places unnecessary restrictions on CFPB oversight of auto lending, including interest rate markups that cost consumers tens of billions of dollars and have been found to violate fair lending practices through a differential impact on minority purchasers of automobiles. The restrictions in this bill do not exist for any other financial practice. Download the comment letter above and download a supplemental factsheet on discrimination in auto lending. Homepage photo credit

A letter to the president of the National Automobile Dealers Association, calling on him to release the data showing the amount customers who finance cars pay in dealer interest rate markup.

A recent blog on the Washington Post site took Senator Elizabeth Warren to task for citing a statistic in a report from the Center for Responsible Lending (CRL). Our report quantified the amount that consumers pay in auto dealer markups. Auto dealers are paid large bonuses to raise the rate on auto loans above the rate that consumers qualify for. Auto loans are a big business--$955 billion in loans are currently outstanding, dealers provide 80% of these loans, and these bonuses can be more than $1,000 per loan. This adds up to a lot of money. The blog criticized our analysis, but on...