OCC Deputy Warns of Dangers From Longer-Term Auto Loans

Risk is rising as a result of auto lenders extending loan terms, more loans going to consumers with low credit scores, and higher loan-to-value ratios, warned Darrin Benhart, deputy comptroller for supervision risk at the Office of the Comptroller of the Currency, according to a published report.

During a speech at the conference of the Global Association of Risk Professionals in New York this week, Benhart  spoke about the dangers of low interest rates and falling oil prices, but specifically singled out the dangers surrounding the current auto finance market, and said that the OCC is already starting to see deterioration in auto lending portfolios.

While some people may point to the strong performance of car loans during the last recession as an encouraging sign, Benhart said, it is unclear if the trend will continue.

“So far, rapid growth in auto loan volume and low payments have offset the full impact of the risk by masking delinquency and loss rates as a percentage of total volume,” Benhart said. “We will have to wait and see how those investments perform over time, but institutions should take care to manage these risks carefully.”