Stiffer competition is intensifying risk in the auto sector, despite what some are reporting, said Darrin Benhart, Office of the Comptroller of the Currency’s deputy comptroller for supervision risk management, at the Financial Services Collections and Credit Risk Conference in Las Vegas on Tuesday. “Some in the media and industry have downplayed the significance of the risk we are identifying in the auto lending industry,” Benhart said. “But at the OCC, we will continue to monitor product terms and risk-layering practices to ensure that banks manage growth and exposure prudently.”
Benhart told attendees that total outstanding auto loans at national banks and federal thrifts grew 13% in 2013, and another 4.8% through June 30. Banks hold 29% of the total auto lending market, or about $262 billion in outstanding loans, according to Benhart, and pressure to compete has driven some auto lenders to pursue growth by lengthening terms, increasing advance rates, and originating loans to borrowers with lower credit scores. “The results have yet to show large-scale deterioration at the portfolio level, but we are definitely seeing the signs of increasing risk,” Benhart said.
