Non-bank auto financing to fall under CFPB purview
Posted on Friday, June 12, 2015 at 1:44:48 PM
When it comes to purchasing a new car, often Americans finance their vehicles through non-bank entities, such as the auto dealer.
Auto loans represent a significant portion of household debt in America. U.S. consumers had around $900 billion in auto loans outstanding in the fourth quarter of 2014, according to insideARM.com. This financing is offered either by banks or lenders, or by auto dealers themselves, who often proceed to sell rights to the contract to a third-party firm.
For some time, this practice has gone on relatively unregulated, compared with financing options provided by banks and other similar firms. However, non-bank automobile financiers will soon come under the purview of the government like banks and similar institutions already are. The Consumer Financial Protection Bureau, the agency that ensures consumers are safe in the financial sector, will be expanding its regulatory powers with its recently introduced rule, so that it can regulate indirect financing options offered by non-bank entities.
The CFPB will oversee auto financing provided by companies that make, acquire or refinance 10,000 or more loans or leases annually. The 34 firms that will be regulated by the agency are responsible for the vast majority of all non-bank auto loans and leases.