Behind mortgages and student loans, auto loans make up the third largest source of household debt. Consumer safety when it comes to financial decisions is critical. The Consumer Financial Protection Bureau (CFPB) was set up to protect consumers by establishing operational rules and regulations for financial institutions of all types. Changes and updates are constantly being made to benefit consumers. Recently, an addendum has been put in place adding nonbank finance companies that originate auto loans to the list of organizations regulated by the CFPB.
On June 10th, the CFPB made a final ruling on a proposal from September of 2014. The amendment deals with a regulation defining groups under the CFPB’s supervision of auto loans. They will no longer only regulate banks and credit unions, but any large nonbank company. According to the Bureau’s press release, these are companies that “make, acquire, or refinance 10,000 or more loans or leases in a year.” These include brokers or dealers, loan or finance companies, money service businesses, or any other business that consumers work with for auto loans.
Once in effect, the Bureau will have the authority to supervise these nonbank auto finance companies. The press release quotes Director Richard Cordray on why the ruling was made, “Auto loans and leases are among the most significant and complex financial transactions in a typical consumer’s life. Today’s rule will help ensure that larger auto finance companies treat consumers fairly.” Protections put in place through the Dodd-Frank Act of 2010 will be covered by this addition as well.
This means more protection for the average consumer. Sometimes, when going and buying a new car, getting a loan with a nonbank company seems to be the best deal–everything they offer will fit your budget, and they use appealing strategies to entice you. Then it’s time to start paying off your loan, and rates are higher than they told you initially. Without regulation, these companies previously had no one to answer to.
The Bureau also updated its Supervisory and Examination Manual, which they use as a reference for assessing and monitoring companies. The guidelines make sure companies market financing terms without deception, provide accurate information to credit bureaus, follow proper procedures when collecting debts, and practice fair lending procedures.
Like these companies, Credit Control is also regulated by the CFPB. The regulations fall in line with our company’s service, performance, employee, and team values. We respect the value of what the CFPB does for consumer financial protection, and continually strive to comply with its rules. It’s hard to say how these newly regulated companies will react to the changes, but it will benefit their reputation in the long run. The goal of the CFPB is to require loan originators of any type to be reasonable and straightforward with their information so consumers can make an informed decision.