New data request could feed CFPB enforcement actions

The Consumer Financial Protection Bureau appears to have begun an extensive fishing expedition into auto finance origination and servicing procedures. [caption id="attachment_57334389" align="alignnone" width="2560"] Photographer: Joshua Roberts/Bloomberg [/caption] Last week, the CFPB ordered nine “large” auto lenders to provide it with hundreds of millions of data points based on details from their portfolios. The CFPB declined to identify the lenders and said only that they represented a cross-section of the industry. The agency noted that it was seeking the information to track “how the components of auto loan transactions have changed over time” while simultaneously fulfilling its mandate of “ensuring that markets for consumer financial products and services are fair, transparent and competitive.” The auto finance market has seen “significant change” over the past two years, the CFPB wrote in the Feb. 23 blog post authored by Chris Kukla, Richard Landau and Ashwin Vasan, which announced the new “ auto finance data pilot ,” as it is called. “Car prices have risen substantially, leading to larger loan amounts and higher monthly payments,” the trio wrote. “These more expensive loans are beginning to have an impact on consumer and household financial stability.” The CFPB’s auto finance data-gathering effort originally was announced in November 2022. The following month, the agency held an event with market participants and analysts as well as consumer researchers and advocates. Participants discussed the auto finance data landscape and identified three areas that would benefit from “additional data visibility.” The CFPB labeled those areas as loan performance trends; lending channel differences; and data granularity, consistency and quality. Specifically, the CFPB concluded that it needs more definitive data on the confluence of repossessions, delinquencies and defaults, along with the ability to analyze differences between the direct versus indirect lending. Further, the agency will require data sets based on consistent definitions and thresholds. Mountains of data To that end, the CFPB asked these nine lenders to provide it with mountains of data. On the surface, the CFPB simply asked each lender to answer five questions, two related to originations and three related to servicing. But each question consisted of 20 to 30 data points, and all five requested data for every loan originated or serviced from Jan. 1, 2018, through Dec. 31, 2022 — a five-year period. For the nation’s largest financiers, the number of loans and leases the CFPB is seeking could number anywhere from 1 million to 15 million individual accounts, multiplied by about 100 factors. For instance, the Feb. 23 blog post identifies the multiple repo-related areas requiring “reliable” information, such as the number of days past due a loan typically is before a vehicle is repossessed or the length of time a consumer has paid on a loan before the vehicle is repossessed. Additionally, the CFPB seeks answers to questions related to the post-repossession impacts for borrowers and lenders, including a breakdown of fees charged to the consumer for recovery, towing, storing, reconditioning, personal property, attorneys’ fees, lender fees and third-party fees. Further, the CFPB queries lenders about the correlation between delinquency and geography, credit score and borrower income, and seeks insight into the kinds of technology used during repossession, like GPS tracking and starter-interrupt devices, their effectiveness and their impact on repossession timing. Similarly, one of the CFPB’s origination questions requests a breakdown of dealer fees, including fees for add-on products, lender-provided or third-party GAP, service contracts, prepaid maintenance plans, extended warranties, in addition to a slew of questions related to the amount financed, loan term , APR, subvention, buy rate, dealer markup, and loan-to-value and payment-to-income ratios. In its effort to create a consistent data set, the CFPB’s request also consists of five pages of definitions, for terms including “you” and “your,” “accounts,” “repossession forwarding company hot list” and “reaffirmation agreement for the loan was signed and executed.” Though the sample order posted in the CFPB’s blog post lacked the deadline by which lenders are required to respond, a similar data request of tech giants had a two-month response window. Perhaps more ominously, the CFPB’s Order to File Information on Auto Lending noted that, while the data the agency collects is meant to be used to monitor the market, the CFPB “reserves the right to use the information for any purpose permitted by law.” In other words, the CFPB could take the data it collects and use it to issue repossession and servicing rules — or enforcement actions — in the coming months and years. Auto Finance Summit East, Auto Finance News’ new spring event, is set for May 10-12 at the JW Marriott Nashville featuring a fireside chat with Peter Muriungi, CEO of Chase Auto. Visit autofinance.live.

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