Listen: Weekly Wrap discussion on credit, fees

Auto credit availability continued to improve in October while regulation scrutiny ramped up. The Dealertrack Credit Availability Index increased 0.2% sequentially and 3.4% year over year, indicating auto credit was easier to get compared with September. Lendbuzz , an artificial intelligence (AI)-based auto finance startup, secured a $150 million term credit facility earlier this month with JPMorgan . The Boston-based financier leverages AI and machine learning to lend to borrowers without a U.S.-based credit score. Lendbuzz originates around $1 billion in auto loans per year and is active in about 10 states. Meanwhile, regulators continue to home in on fees related to auto lending. Florida Attorney General Ashley Moody’s office is investigating several dealerships and lenders following consumer complaints regarding fees associated with lease end buyouts . In this episode of the Weekly Wrap, Deputy Editor Amanda Harris and Editor Joey Pizzolato discuss this week’s top stories, and what is to come in the week ahead. Subscribe to The Roadmap Podcast on iTunes , Spotify , or download the episode. Editor’s note: This episode is sponsored by McGlinchey . Video Transcript: Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain. Joey Pizzolato 00:02 Hello everyone and welcome to the roadmap from auto finance news since 1996, the nation's leading newsletter on automotive lending and leasing. It's Monday, November 28. And I'm Joey Pizzolato joined by Amanda Harris. This is our weekly wrap on what happened in auto finance for the week ending November 25 2022. Thank you to McGlinchey for sponsoring this episode. In general news, Federal Reserve Chair Jerome Powell is expected to this week cement expectations that the Fed will slow its pace of interest rate increases next month while reminding Americans that its fight against inflation will run into 2023. Powell is scheduled to deliver a speech at an event on Wednesday and hosted by the Brookings Institute in Washington, and we want them to last from policymakers before the start of a quiet period ahead of their December 13 and 14th. Gathering. In auto finance, credit availability continued to improve in October while regulation scrutiny ramped up. The dealer track credit available ability Index increased 0.2% sequentially and 3.4% year over year, indicating auto credit was easier to get compared with September. October marked the second consecutive month of include improved credit availability following four months of tightening lending standards. Compared with pre pandemic February 2020. Credit access was looser by 4.8%. According to the index. There was a bright spot for new vehicle inventory last week as well. new vehicle days supply in October climbed to the highest level since May 2021. While use vehicle inventory slightly declined amid easing supply chain holdups. days supply for new vehicles reached 49 In October, an increase of six days sequentially and marking the highest level since May 2021. According to Cox automotive analysis of V auto inventory data data supply home 70% compared with the end of October 2021. Total your supply of unsold new vehicles came in at 1.5 6 million units at the end of October, an 18.8% sequential increase and a jump of 78% year over year. inventory levels however, still remain well below historical standards. US supply landed at 2.5 9 million units or 65 days supply in October 2020 and pre pandemic supply Senate 3.4 9 million vehicles representing 86 days supply in October 2019 According to Cox auto. Meanwhile, regulators continue to hone in on fees related to auto lending. Florida attorney general Ashley Moody's office is investigating several dealerships and lenders following consumer complaints regarding fees. So associated with lease and buyouts. Amanda what's going on there?Amanda Harris 03:08 Or so essentially, the takeaway here is that lenders and dealers need to be aware of you know, their disclosure practices, and any fees associated with when a consumer you know, insert a lease and sells a vehicle. So it's all has to do with fees associated with the purchase of that vehicle that come up, you know, at the time of the lease buyout when the lease ends. So basically, the Attorney General Office is specifically to Florida. But obviously, we all know that anything that happens in one state could trickle into other states, and it could go into other regions as well. So definitely something to keep, you know, keep an eye on. So this investigation came out of, you know, the Attorney General Office and actually a news station looked into a bunch of consumer complaints that they were getting from their lease and buyout process. And you know, it's all these different fees, the subpoenas break down 12 different areas of fees that they're looking into. So it's a pretty extensive look back. It's also about four years or they're asking these dealers and finance companies to look back to to provide documentation showing, you know, why the fees were charged, what they were charged for, kind of backing up all the reasons behind these fees to determine whether or not these were excess fees and whether or not there needs to be some changes to the law or some kind of, you know, action taken on the part of regulator so nothing has come out yet as far as actually enforcement action, but there is this could be a step toward that depending on what their investigation finds. So right now they've subpoenaed involves, you know, couple different dealerships so Gunther Motor Company, Homestead Hyundai, Hyundai Capital America, Lexus of Clearwater, Toyota Motor Credit Corporation and VW Credit Leasing. So it gives you kind of the scope of who they're really looking at, again, going back to 2018. And basically they broke down kind of what they're looking for from the more finance companies versus what they're looking for. From the dealerships. There was a lot of you know, crossover as far as disclosure practices, things like that, describing the fees, but for the captives, they're also asking for information on their, you know, their policies, their requirement, informations related to the vehicle purchases, things like option rates, fee disclosures, notice documents that were provided to Florida lessees skin, this is strictly in Florida right now. And then documentation showing specifics for for example, for receipt of the buyout funds, and then from the dealerships, you know, same kind of thing, their notices to lessees of any excess fees that would be included in their car purchase before or at the end of their lease term. And then specifics on categories such as like the amount of fees charge, what their search circumstances were surrounding those fees, and then how their organization structure works, and their lease buyout policies. So we're looking into all that to see if there are areas basically where these are excessive, that obviously is for quite a number of complaints is for a new station looking into this based on those complaints. So definitely something to monitor because obviously, if this is found to be excessive, they could be some enforcement action out of unfair practices, regulations in the state of Florida, which you know, could open up. And it's everything from certification fees, dealer service fees, electronic funds, filing fees, lease, buyout, option fees, pre delivery, surcharges, and obviously, some are unavoidable, like registration and titling fees. But some of these others are charged by, you know, the lessor. So some of those things, and another thing to look into and see what might be deemed excessive, was necessary and making sure your disclosure practices are very, very clear for the consumers. So we'll have to kind of see what comes out of the investigation to know if this will lead to any enforcement action or changes to the statute in Florida, and what that might trickle into other areas, depending on, you know, what they decide. That's kind of where it stands right now. So just yet another area of fees. That's been kind of a hot topic lately, for the FTC as well, and the CFPB anything to do with fees related to credit in general, not just auto but then it's also coming into the auto finance world as well, because obviously, that's a form of credit.Joey Pizzolato 07:16 Right, right. And, you know, I think it's significant. Also, in you know, we don't see a whole lot of, you know, ag or state regulation coming out of Florida. So as you know, the second largest or third kind of depending on where they land now. And the market share monitor, you know, their second or third largest state to come out with with a with a major enforcement action and a widespread enforcement action is definitely worth noting. So we'll we'll keep an eye on that as well. That about does it for today's episode. Thanks for joining us on the roadmap and be sure to follow us on Twitter and LinkedIn and we will see you online and auto finance news.net and here next time.

Listen: Weekly Wrap discussion on credit, fees

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