On February 23, the CFPB issued market-monitoring orders to nine large auto lenders to provide information about their auto lending portfolios. According to the CFPB, auto finance market has seen significant change in recent years, resulting in larger loan amounts and higher monthly payments for consumers. As part of monitoring the auto loan market for consumer risks, the CFPB is collecting auto lending data, and issued these orders to the auto lenders to provide certain information about their lending portfolios as part of collecting such data.

The nine auto lenders chosen represent a cross-section of the auto finance market and the CFPB’s goal is that the data collected from their responses will help build data that grants insight into lending channels, loan performance, and potential future data collection efforts.

Prior to this collection process, the CFPB met with various market participants, regulatory agencies, Federal Reserve officials, market analysists, and consumer researchers to gather input on how to best move forward. These meetings helped to identify three areas where participants found that data visibility would be important:

• Lending Channel Differences: collect data that differentiates whether a consumer secures financing on their own through direct lending, or indirectly arranged through the dealer;

• Data Granularity, Consistency, and Quality: collect data that is more complete and centralized across lender types and stakeholders; and

• Loan Performance Trends: collect consistent and granular data on delinquency trends as they relate to geography, credit score, and income.

The CFPB states that the overall response it has received thus far from all interested parties it has consulted is that the current data landscape is insufficient and will take time and deeper analysis to piece different data points together, but the result of such findings, alongside greater transparency, would lead to a better auto lending market.

Putting it into Practice: These orders are the latest in a series of prior marketing monitoring orders issued by the CFPB to participants in the BNPL space and technology companies operating payments systems (see our previous blogs posts on these orders here and here). Based on the latest orders, auto finance companies should expect some agency action in the form of market trend and consumer impact reports that will likely serve as a precursor to potential regulatory inquiries, exams, or investigations. Auto lenders should expect a particular focus increase in auto loan delinquencies, particularly for low-income consumers and those with subprime credit scores.