The top US consumer watchdog has decided to recently expand its control and monitoring duties across the US auto financing system by including key non-bank auto financing companies.
The Consumer Financial Protection Bureau has established a new rule as of Wednesday, designed to have under CFPB compliance exams the companies such as Ford or Toyota that operate internal lending units – used to make, acquire or refinance at least 10,000 loans or leases annually. Until now, the Consumer Financial Protection Bureau was only able to regulate the auto financing industry by assessing banks and credit unions with $10 billion or more in assets. “Auto loans and leases are among the most significant and complex financial transactions in a typical consumer’s life,” said CFPB Director Richard Cordray. “Today’s rule will help ensure that larger auto finance companies treat consumers fairly.” The decision also comes at a time when the booming auto sales are financed through the highest level of long loans and leases, making some industry observers wonder if the auto industry is not heading again towards the same down spiral that was a factor in the Great Recession of 2008-2009.
The Federal Register will publish the new rule and it will have effect 60 days later, with the CFPB, Washington’s latest financial regulatory watchdog, created back in 2010 through the Dodd-Frank Wall Street reform law that was designed to save consumers from wrongdoings of lending practicing. The bureau, through the new rule, will gain control over 34 of the major nonbank auto finance companies in the United States, which operate around 90 percent of all nonbank auto loans and leases.