Under the Hood: CFPB new guidance hinges on negligible complaint data

The Consumer Financial Protection Bureau ’s latest statement cautions lenders to avoid discriminating against auto loan borrowers who are immigrants. Yet, an Auto Finance News analysis of agency data reveals that immigrant-related financing issues were cited in 0.0003% of consumers’ auto lending complaints. The CFPB’s Oct. 12 statement , released jointly with the Department of Justice (DOJ), was framed as an “initiative to better understand the financial experiences of immigrants in the United States” and as “a reminder” that lenders “cannot use a consumer’s or entrepreneur’s immigration status to justify unlawful discrimination.” A related CFPB blog post noted that the agency had received “consumer complaints about loan denials due to immigration status.” The blog further stated that “while the Equal Credit Opportunity Act allows a creditor to consider an applicant’s immigration status when necessary to ascertain the creditor’s rights regarding repayment, creditors should be aware that unnecessary or overbroad reliance on immigration status, including when that reliance is based on bias, may run afoul of the law.” The blog then cited CFPB complaint No. 4164392, which described a scenario in which a loan agent told a consumer and their girlfriend that their credit scores and income were strong, so they should not expect any problems getting the auto loan approval they sought. But, upon learning that the consumer’s girlfriend was an immigrant with protection under Deferred Action for Childhood Arrivals (DACA), the loan agent “immediately said we did not qualify,” according to the complaint. Notably, that lone grievance cited in the blog was filed with the CFPB in February 2021 — nearly three years ago. Since that time, only 13 other immigration-related auto finance complaints have been lodged, according to an AFN search of the terms “immigrant,” “immigration,” “visa,” “undocumented,” “nonresident” and “noncitizen.” AFN excluded from its tally a handful of non-immigrant-related complaints, such as those that referenced credit card company Visa or “undocumented” charges. On a percentage basis, 0.0003% of all auto complaints the CFPB has received since February 2021 have centered on alleged discrimination based on immigration-related issues. In other words, for immigration-related grievances to account for even a single percentage point of the CFPB’s total auto lending complaint tally in the past three years, an additional 43,000 complaints would have to be lodged. Despite this negligible frequency of immigration-focused complaints, the CFPB used the heading, “Consumer complaints reveal problematic practices” for the section of its blog that cited the single, 3-year-old complaint. In response to the immigration guidance, 11 legislators penned a letter to CFPB Director Rohit Chopra and DOJ Attorney General Merrick Garland to “express concerns” about the agencies’ joint statement. “The CFPB and DOJ’s joint directive not only flies in the face of responsible lending standards, risk-based pricing and sound risk management, but also contradicts and rewrites decades' worth of guidance from the CFPB and the federal banking regulators — all without an official rulemaking pursuant to the Administrative Procedures Act, giving financial institutions the chance to comment, or even offering any other semblance of advanced notice,” wrote Ohio Sen. J.D. Vance and the 10 other Republican members of the Senate Banking Committee on Nov. 1. Further, the senators noted that “the importance of considering immigration status when assessing the potential of repayment is nothing short of common sense,” and they urged the CFPB and the DOJ to retract their “irresponsible” joint statement in favor of endorsing “risk-based lending practices that promote safety and soundness in the bank sector.” While some lenders shy away from originating auto loans to consumers who are not U.S. citizens or permanent residents, others build their business on that sector of the market. Tricolor Financial , for one, relies on home-grown AI-powered technology to serve its mostly Hispanic customers. In fact, Tricolor relies on the fact that 60% of undocumented immigrants in America have resided in the U.S. for more than a decade. Meanwhile, Beneficial State Bank launched a program in 2017 that allowed consumers without Social Security numbers to apply for auto loans using their Individual Taxpayer Identification Numbers (ITINs). That year, the bank originated $100,000 in auto loans. By 2022, the bank’s auto loan portfolio hit $33.7 million, with ITIN loans accounting for 13% of outstandings and registering fewer charge-offs than the non-ITIN loans, according to data from the Global Alliance for Banking on Values , a network of independent banks using finance to deliver sustainable economic, social and environmental development. Beneficial State Bank further expanded its auto loan program when California passed a bill allowing undocumented immigrants to apply for driver’s licenses. Lendbuzz , too, caters to car buyers — including undocumented immigrants — who lack credit history. Lendbuzz uses algorithms to analyze indicators like employment and educational background, cash flow and earning potential. As part of its underwriting process, loan applicants connect their bank accounts to the Lendbuzz platform, enabling the lender to review up to 18 months of transaction activity and verify sources of income, spending patterns and borrower geographic location. Clearly, lending to immigrant populations requires specialized expertise. The CFPB’s mandate that all lenders play in the space could be compared to requiring super-prime lenders to make loans to deep-subprime borrowers. The outcome will likely be one of increased — and, perhaps, uncontrollable — losses.

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