CFPB Reports on Consumer Auto Financing Abuse

In a special report, the CFPB highlighted exam findings of unfair, deceptive and abusive acts or practices "across all aspects of consumers' experiences with the auto-finance market."

In the Supervisory Highlights report, the CFPB summarized exam observations, relevant supervisory developments and enforcement actions on the auto loan debt market, that "exceeds all other household-debt categories except for home mortgages." The CFPB stated that, as of the second quarter of 2024, Americans owe $1.616 trillion in auto loan debt.

The report covers the spectrum of a consumer's experience with auto loans from "consumers being lured in through deceptive advertising about available loan terms" to "having their payments misapplied or incorrect information about their payment history reported to credit reporting companies" to auto repossession.

The CFPB focused on:

• Misleading APR Marketing. The CFPB found that lenders misrepresented APR terms by advertising "as low as" rates. The CFPB said that most consumers would not qualify for these rates and that, despite being "prescreened," many consumers were offered rates significantly higher than advertised, often double. Lenders were advised to cease these deceptive practices and ensure clear, accurate disclosure.
• Improper Payment Allocation. The CFPB found that some servicers deviated from disclosed payment allocation methods, leading to unnecessary late fees for borrowers. 
• Add-On Products. The CFPB said that add-on products, such as extended service contracts and "guaranteed asset protection" waivers, were high-risk areas. Some lenders financed add-ons that consumers did not agree to, or which required burdensome cancellation steps.
• Credit Reporting Deficiencies. The CFPB found that lenders failed to promptly correct known errors, affecting consumers' credit profiles. The agency also noted that some inaccuracies persisted for over a year before correction, which demonstrated the need for improved monitoring and data accuracy protocols.

The CFPB also noted that many of these findings are relevant to consumer lending generally.