December 1, 2014
ON THE WEB: Credit Union Execs See Growth in Auto Credit
A TransUnion survey found nearly 84 percent of credit union executives ranked auto loans as one of their top three areas for growth. By a 2-to-1 margin, auto loans were chosen as the top growth opportunity over the next 12 months relative to the next highest rated loan product mortgage loans.
New Cars Out of Reach For Many Consumers
Requisite Press LLC reported an October Auto Buyer’s Affordability Index (ABAI) of 54.1, indicating that a prudent, median-income household can only afford 54.1 percent of the new-car average price.
FTC Seeks Comment on Used Car Rule Changes
The Federal Trade Commission is seeking supplemental public comments on proposed changes to the agency’s Used Car Rule and the Used Car Buyers Guide. The commission is not adopting any final amendments to the rule at this time.
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CFPB Takes Action Against DriveTime By Ted Craig
The event buy-here, payhere dealers have dreaded for years has happened – the Consumer Finance Protection Bureau has taken action against a major player in the segment. Arizona-based DriveTime Automotive Group Inc. must pay $8 million to settle claims it harmed consumers by making harassing debt collection calls and providing inaccurate credit information to credit reporting agencies. DriveTime must also end its debt collection tactics, fix its credit reporting practices and arrange for harmed consumers to obtain free credit reports. “Consumers who purchase a car at a buy-here, pay-here dealer deserve to be treated fairly,” said CFPB
Director Richard Cordray. “DriveTime harassed and harmed countless consumers, many of whom were economically vulnerable. Our action forces DriveTime to
stores, DriveTime definitely qualifies as a “large participant” in this market. The CFPB said that at least 45 percent of DriveTime’s auto installment
ters and 80 contractors in Barbados. These employees and contractors placed tens of thousands of collection calls each weekday. At the end of 2013, DriveTime had approximately 69,000 installment contracts past due that these employees would have been calling about.
pay the price for its illegal debt collection tactics and for neglecting the accuracy of consumers’ credit information.” The regulator has been looking at the biggest operators in buy-here, pay-here for a couple of years. “The message is that it’s our turn,” said Ken Shilson, founder of the National Alliance of Buy-Here, PayHere Dealers. With more than 100
contracts were delinquent at any given time. When DriveTime consumers fell behind on their installment payments, DriveTime’s extensive collections operation began calling them. DriveTime had at least 290 collection employees in two domestic call cen-
Shilson said DriveTime’s size worked against it. “The bigger you are, the bigger target you are and the bigger the chance of something going wrong,” Shilson said. The violations the CFPB lists include many that indicate basic problems Continued on page 15
New York City Investigates Santander’s Finance Practices New York City’s Department of Consumer Affairs announced an investigation into used-car lending, issuing subpoenas to Santander Consumer USA Inc. and Santander Consumer Funding 3 LLC, auto finance companies owned by Banco Santander S.A. As the licenser and regulator of the city’s used-car dealerships, DCA is for the first time ever investigating used car dealer financing practices, in particular subprime loans underwritten by lenders such as Santander and arranged for consumers by the dealerships. This inquiry builds on DCA’s earlier investigations, which raised concerns that dealerships may be engaged in illegal practices such as sell-
ing expensive and unwanted add-ons and arranging highinterest subprime loans without providing consumers with required information. DCA’s investigation is focused on indirect auto loans financed by lenders such as Santander and will examine records of these loans over the past three years. New York law requires that if a dealership recommends a financing company such as Santander to a consumer, they must disclose the interest rate that the company can charge and other terms and charges, but DCA’s earlier investigations suggests that dealerships may not be complying with this requirement.
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