CFPB Auto Loan Data Collection and What it Means for Auto Lenders

CFPB Auto Loan Data Collection and What it Means for Auto Lenders Informed

The Consumer Financial Protection Bureau (CFPB), in a move that could have seismic regulatory implications for auto lenders, recently announced a proposal to collect detailed, transactional information from thousands of loan providers.

Quick background

In early 2023, the CFPB issued a data request to nine auto lenders relying on its authority under Dodd-Frank to monitor risks for  consumers in consumer financial products or services (See section 1022(c)(1) of the Dodd-Frank Act). Based on this pilot test, the CFPB, on January 23rd, 2024, published a notice in the Federal register proposing to massively expand the data collection to 4,000 lenders. 

The CFPB’s Federal Register notice indicates that the Bureau plans to send out two different annual data requests: the first targets issuers of more than 20,000 auto loans annually, and a second more targeted request for issuers of between 500 and 20,000 auto loans annually.

  • Lenders with 500 to 20,000 annual loan originations: The CFPB would ask target questions regarding the number of vehicles repossessed and the number of loan modifications in the lender’s portfolio.
  • Lenders with more than 20,000 originations:  The CFPB proposes sending this group a data request modeled after the data request from the 2023 pilot. The CFPB previously disclosed a sample order from this pilot. It’s worth looking at because it’s detailed and comprehensive. It requires lenders to submit detailed information for each loan from their standard contracts and loan servicing systems.
    • Originations: For every auto loan originated in the previous five years, the sample order calls for 23 categories of data related to vehicle loan terms and pricing and another 23 categories of data related to the borrower, the lender and the dealer.  These categories include vehicle cash price, sales tax charge, granular breakdowns of payment and charges, interest rate, buy rate, dealer markup or reserve, and detailed information on the borrower and co-borrower’s credit score;
    • Servicing: The servicing questions from the sample order has 18 different categories 
    • Assignment and Completed Repossession or Voluntary Surrender: There are 28 categories of questions for vehicles assigned to or resulting in a repossession or voluntary surrender.

Next Steps

The CFPB’s data collection efforts, entitled the “Auto Finance Data Project,” are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act.  Members of the public can submit comments on the proposal for OMB’s consideration until March 25, 2024.

Here’s what the industry can expect after the public comment period:

  1. The CFPB will review the public comments and make any changes it wants based on the feedback.
  2. The CFPB will then publish a second-thirty day notice to the Federal register for public review outlining any changes and simultaneously submit the package to OMB.
  3. Finally OMB reviews the proposal and issues a decision. Typically, the OMB review takes 60 days.

For more details see the following process overview.

How the Data will be used

As somebody who led data collections at the CFPB in a previous life, I have some inkling of how the CFPB may leverage this information. Both the enforcement and supervisory arms of the CFPB focus their activities on risk. CFPB staff will scrub and analyze the data, and use it to identify targets for Enforcement actions and supervisory exams. The data will go into the annual Enforcement-Supervision priorition process determining which institutions undergo scrutiny.

If the CFPB collected the data from the sample order, it could use this information to conduct:

  • UDAAP reviews of prices charged for individual vehicles, servicing, and the administration of vehicle repossessions; 
  • Assessments of compliance with statutory limits on GAP and other government fees;
  • Fair lending compliance across the auto loan lifecycle from origination, to the sale of aftermarket products (including GAP), dealer markups, and other products and services;
  • Compliance with military service member lending laws;
  • UDAAP issues related to the repossession and voluntary surrender of vehicles;
  • Reviews of complaints.

How this might change industry practices

Should the CFPB receive approval to collect this data, auto lenders should assume the Bureau will use this data to aggressively target illegal practices. Lenders will need to automate their compliance processes and get real-time insight into what’s happening with their portfolios. To minimize potential regulatory landmines, lenders must review their data, identify potential hazards and mitigate them, before the regulator finds them in an external review.

author avatar
Tom Oscherwitz VP of Legal
Tom Oscherwitz is Informed’s VP of Legal and Regulatory Advisor.  He has over 25 years of experience as a senior government regulator (CFPB, U.S. Senate) and as a fintech legal executive working at the intersection of consumer data, analytics, and regulatory policy.

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