Outstanding auto loans decreased slightly from a year ago for Fifth Third Bank in the third quarter. Meanwhile, the bank said it’s too soon to tell whether lower ceilings on dealer reserve will affect its auto loan business.
“In terms of the impact of the current structure, we’re working with our dealers right now,” Chief Financial Officer Tayfun Tuzun told analysts, investors and media in a conference call on Tuesday. “And as we look forward into 2016 after going through the dialogue that we have in place with our dealers, we’ll give you a better perspective.”
Fifth Third outstanding auto loans averaged $11.9 billion for the third quarter, down 2% from a year ago, the bank said.
On Sept. 28, Fifth Third reached a Honda Finance-style consent order with the Consumer Financial Protection Bureau and the U.S. Department of Justice, to settle accusations of discrimination based on statistically higher rates for minority borrowers.
The consent order included a lower ceiling on dealer markup of 1% or 1.25% over the buy rate depending on the term, plus a total of $18 million in refunds to consumers. In the period covered by the consent order, Fifth Third’s maximum markup was 2.5% over the buy rate, the CFPB said. The CFPB reached a similar consent order with American Honda Finance Corp. in July.
The two consent orders were similar in that Fifth Third and Honda Finance agreed to limit, but not eliminate, dealer reserve, also known as dealer markup. Also like Honda Finance, Fifth Third was not assessed a civil penalty on top of consumer restitution. Honda Finance paid $24 million in refunds.