In many parts of the country without viable mass transit options, Americans need cars for transportation to jobs or schooling. And surging car sales, now at their highest pace since 2007, helps the broader economy. So an increase in auto loans isn’t necessarily bad. But when all the growth in lending comes from subprime borrowers, who are vulnerable to greedy financiers by virtue of their sheer desperation, experts get nervous. “The question is whether it’s predatory, and where you draw the line,” says Stuart Rossman, director of litigation for the National Consumer Law Center. His organization and others have found multiple ways in which auto dealers scam subprime borrowers, forcing them into higher interest rates and longer-term loans. Auto dealers, the middlemen between a consumer with bad credit and the financing for the vehicle, have outsize power to set terms and extract profits. And though the Consumer Financial Protection Bureau is supposed to protect Americans from this kind of mistreatment, there’s a catch: Congress carved out an exemption from CFPB regulation for auto dealers, putting their oversight in the hands of the notoriously sclerotic Federal Trade Commission. As a result, just as water inevitably rolls downstream, big money has flooded into auto loans, the financial transactions with the fewest eyes on them.
Posted on: Thu, 28 Nov 2013 19:22:56 +0000