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CFPB to Oversee Nonbank Auto Finance Companies
Friday, June 12, 2015 6:35 AM

Bureau Publishes Exam Procedures for Supervised Companies in $900 Billion Market

The Consumer Financial Protection Bureau published a rule yesterday that will allow the agency to supervise larger nonbank auto finance companies for the first time. The CFPB also released the examination procedures that examiners will use to ensure that auto finance companies are following the law.

“Auto loans and leases are among the most significant and complex financial transactions in a typical consumer’s life,” said CFPB Director Richard Cordray, adding that the rule will help ensure that larger auto finance companies treat consumers fairly.

Auto loans are the third largest category of household debt, behind mortgages and student loans. American consumers had about $900 billion in auto loans outstanding in the fourth quarter of 2014. The automobile leasing market also continues to grow as more than a quarter of new cars are acquired through leases.

Currently, the Bureau supervises auto financing at the largest banks and credit unions. Yesterday’s rule extends that supervision to any nonbank auto finance company that makes, acquires, or refinances 10,000 or more loans or leases in a year. Under the rule, the Bureau may oversee their activity to ensure they are complying with federal consumer financial laws, including the Equal Credit Opportunity Act, the Truth in Lending Act, the Consumer Leasing Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank Act) prohibition on unfair, deceptive, or abusive acts or practices.

To coincide with this new authority, the Bureau has also updated its Supervisory and Examination Manual to provide guidance on how the Bureau will monitor the bank and nonbank auto finance companies that it supervises. Examiners will be assessing potential risks to consumers and whether auto finance companies are complying with requirements of federal consumer financial law.

This rule will take effect 60 days after publication in the Federal Register.

Review a copy of the rule.

Review the Examination Procedures for Auto Finance.