The NYC Department of Consumer Affairs launched an initiative last week to create a “safer loan product” for used-car buyers, essentially locking dealers out of the financing process. The DCA’s proposed auto loan product will connect consumers to direct financing options with “reputable banks and credit unions in New York City” that agree to certain terms and conditions set by the regulator, including a 16% cap on interest rates, said DCA Commissioner Julie Menin in a March 23 press release.
The agency cites unspecified studies of auto loans originated at dealerships with “higher interest rates and less favorable terms,” and describes them as “similar to those that were blamed for the country’s mortgage crisis.” Such loans are growing “at a staggering rate of more than 130% in recent years,” according to the release.
The DCA has set an April 17 deadline for New York-based financial institutions to express interest in joining the initiative. “Our hope is that New York City’s financial institutions will step in and fill a void for a fair and safe auto loan product to be offered directly to consumers,” Menin said. The DCA licenses 869 dealers in New York City.
Learn more about risk and compliance in auto finance May 18 and 19 at the Auto Finance Risk & Compliance Summit 2015 in San Diego. Register here.