Monday, January 20, 2014

Indirect Auto Lending Will Be Subject to Greater Scrutiny in 2014

Fitch on January 16 warned that "[h]eightened scrutiny of potentially discriminatory auto lending practices by the U.S. Consumer Financial Protection Bureau (CFPB) will likely raise lender regulatory costs in 2014."

Fitch noted that the CFPB began to investigate the auto finance industry last year over allegations that lenders my have discriminated against borrowers based on race and violated the Equal Credit Opportunity Act.

The CFPB is focusing on the practice of indirect lending through dealers, which allows dealers to mark up the interest rate submitted by the lender.

Fitch believes that increased regulatory costs and compliance requirements will weigh on the financial performance of auto lenders in 2014.

As of September 2013, NCUA reported that 1,839 credit unions reported operating indirect consumer loan programs.

Read the Fitch press release.

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