Credit Industry Oversight Agency To Host Forum On Auto Lending

The Consumer Financial Protection Bureau, or CFPB, oversees the nation’s credit industries. On Thursday it will host a forum in Indianapolis to discuss the U.S. auto-lending market, which some observers believe could be the next credit bubble to burst. 

The subprime mortgage market played a key role in the 2008 economic downturn as borrowers with poor to no credit obtained loans they were later unable to repay. Home-borrowing criteria have tightened since then, making it difficult for many to find home financing at all. But now some watchdog groups are pointing to a different market where they say credit is dangerously easy to come by.

“There are serious abuses in the auto-lending market that have existed for quite some time,” says Chris Kukla, the senior vice president at the Center for Responsible Lending. 

He’ll be speaking at Thursday’s field hearing at IUPUI, and he says the current auto-lending situation is similar to the housing bubble in two ways. First, lenders have made it easier to finance cars for borrowers with less than ideal credit. And secondly, those subprime loans are making it onto the open market.

“We’re seeing an increase in the number of lenders who are then packaging up all of those loans and selling them onto Wall Street and then they’re being sliced up into securities," Kukla says.

And that sounds similar to the mortgage-backed securities that caused so much trouble in 2008. Kukla says he’s concerned something similar could happen—investors holding bonds that become worthless as borrowers default on automobile debt.

But he’s also concerned vulnerable borrowers could face automotive repossession after the industry lent them more than it should have.  And Kukla says that could have big implications.

"If you live in a metro area, and you have access to [just] transit, that means you only have on average access to thirty percent of jobs in that area," Kukla says. "And so a car is a lifeline for people to be able to get to jobs, get the kids to school, to do all the things that people want to do."

The Consumer Financial Protection Bureau field hearing on auto finance will be held at 11 Thursday morning in Hine Hall Auditorium at IUPUI. It’s open to the public and can also be streamed online on the CFB website.