Ensuring Affordable Credit For Auto Loans 2022
Affordable Credit For Auto Loans When loans are affordable, consumers can repay the loan and continue to use their car. When loans are made at the edge of (or beyond) a consumer’s ability to repay, any economic disruption in the consumer’s life can result in repossession.
Given the increase in loan amounts, the rising length of loan terms, and the uncertainty around the ongoing economic recovery, we will be closely monitoring lender practices and consumer outcomes. In particular, we continue to evaluate lending structures where lenders seem to rely on high-interest rates and fees to profit even when consumers fail.
We are also concerned about loan-to-value (LTV) ratios in the auto loan market. While LTV ratios have dropped in the past year for consumers who already had cars due to high used vehicle prices, LTVs were climbing prior to the global vehicle shortage. We expect that trend to resume once price pressures abate. We will continue to monitor the market as pricing issues persist.
Monitoring practices in auto loan servicing and collections
The current economic recovery is uneven, and some consumers have been hit harder economically due to the pandemic. We want to ensure that incentives are aligned between servicers and consumers,
that servicers are making accommodations available to all consumers and that servicer practices treat consumers fairly. We will also continue to work with our federal agency partners to ensure that the special protections offered to our servicemembers are followed and enforced.
Technology continues to shape auto loan servicing and collections, but with that comes questions about the effect on consumers. It is now less costly to repossess a car because many lenders require the use of some of these technologies.
For example, some lenders require access to GPS locators so that they always know where a car is physically located, require the installation of technology that blocks a borrower who has missed even one payment from starting the car, or use license plate recognition (LPR) technology to find cars on repossession “hotlists”.
We are concerned that the use of these technologies may disproportionally impact certain communities, and we are taking steps to better and fully understand their impact, including privacy concerns associated with them.
