The CFPB issued its Monthly Report this week. The report is a high level snapshot of trends in consumer complaints and provides a summary of the volume of complaints by product category, by company and by state. This month’s report highlights consumer loans with auto lending playing the starring role.The report provides some forecasting of areas regulators are likely to focus on in upcoming examinations and auto lenders, in particular, should take note.
Each month, the Report breaks down complaint volume by product looking at a three month average and comparing the same to the prior year. As has been the case in prior months, the Report continues to indicate that the three products yielding the highest volume of complaints are debt collection, credit reporting and mortgage. If there is good news to be had, the Report indicates that debt collection complaints remained flat in a year to year comparison with 2015. Student loans showed the most significant increase in volume over last year’s comparable period with an increase of 61%. Taking this into account, we are likely to see an increased focus on student lending issues in coming months.
This month’s report focuses on consumer loan products and in particular, auto finance. According to the Report and within the product category, vehicle loans comprise 52% of all complaints.The Report indicates that:
- The most common complaint received regarding auto loans is that consumers have difficulty managing their loans.The report does not explain what in particular that means, but the complaints received are centered on payment processing issues, disputes as to balances, and repossessions without prior notification.
- The Report also notes that consumers are submitting complaints regarding warranty coverage on used vehicles.It would not be surprising to see the Bureau at some point turn its attention to extended and third party warranty products.
- Another issue highlighted by the CFPB is concerns with the advertising practices at “Buy Here, Pay Here” dealerships.Consumers are complaining about false and deceptive advertising centered on “no credit check” policies and promises to rebuild credit.
So What Are the Key Take Aways? The CFPB appears focused on the “unfair and deceptive” aspects of auto lending. The CFPB is reporting that their analysis of the complaint data "shows consumers sometimes have difficulty understanding loan features during the loan negotiations" and find the terms of their financing "confusing". Many Consumers Face Challenges in Understanding Auto Financing, Says New CFPB Report (June 27, 2016). Lenders should keep in mind that the CFPB often relies upon the “unfair and deceptive” provision of Dodd Frank to regulate through enforcement actions. Based upon the Report and the “Know Before You Owe” campaign by the CFPB, it would not be surprising therefore to see the CFPB focus in upcoming examinations on the manner in which payments are being processed, adequate disclosures as to the application of payments and repossession procedures and policies. It would also not be surprising at some point focus to see some sort of mandated disclosures by the CFPB, particularly in the used vehicle setting and with respect to add on products.