In February 2023, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) announced an auto finance data pilot, ordering nine large auto finance companies to provide information about their auto loan portfolios. These lenders consisted of banks, finance companies, and captive lenders (manufacturer-owned finance companies that generally offer below-market interest rate auto financing to consumers). The Bureau stated that it plans to use this information to build a dataset that will provide insights into lending channels, loan performance, and inform future data collection efforts. Indeed, earlier this year, the CFPB published a notice in the Federal Register seeking Office of Management and Budget (“OMB”) approval for the collection of auto finance data pursuant to its authority under the Dodd-Frank Act. To date, OMB has not made a decision on this request.
In June 2024, the CFPB released its first findings from this data pilot. In this report, the CFPB found that consumers who financed prior car debt into new auto loans were more likely to have their accounts foreclosed, have larger auto loans, have lower credit scores, lower incomes, and longer loan terms. The Bureau concluded its report by showing that financing prior car debt was likely to result in even higher levels of consumer stress. The Bureau also concluded that these individuals had worse outcomes than individuals who did not finance their debt. At the time, the CFPB said it planned to look more closely at this data and lenders’ use of debt financing.
On August 5, 2024, three consumer advocacy groups, the Consumer Federation of America, the National Consumer Law Center, and the National Fund for Financial Reform and Education (collectively, the “Consumer Groups”), sent a letter to the CFPB expressing their support for the Auto Financial Data Pilot and urging the CFPB to make public more of the information it has already obtained from the Data Pilot and to expand the amount of data collected from the Data Pilot.
Consumer groups praised the data the CFPB has collected and made public, noting that the information from this data program provides much more detailed debt financing information than is available from other sources. In addition to the data the CFPB already makes public, consumer groups called for the CFPB to also release data on military personnel, add-on products, repossessions, and payments between dealers and finance companies.
Consumer advocates also urged the CFPB to expand the data it collects from auto lenders to several different categories of auto loans. Specifically, the consumer advocates asked the CFPB to:
- It would collect data on auto loans from credit unions, allowing it to compare outcomes between consumers who got loans directly from credit unions and similarly situated consumers who got “indirect loans” from credit unions through dealerships.
- Extend data collection requirements to “buy here, pay here” dealers and evaluate the use of pre-dispute arbitration agreements, as consumer groups believe these dealers may be subjecting consumers to unprotected harm.
- Collect data on car leasing to ensure tax credits are applied to consumers who lease clean cars, as dealers often claim.
- It collects data related to “language access, including language preferences, accessibility, translation efforts, and other customer service practices.”
The CFPB is expected to continue to issue reports based on data obtained through this data pilot, and the bureau may also expand the data it collects from auto loan companies, and this letter may provide a first look at what steps the CFPB could take to further expand the Auto Finance Data Pilot.