The volume of car loans is near pre-carmageddon levels, but a federal probe of business practices threatens to “slow the booming car-loan industry,” the Wall Street Journal writes.
According to the report, the Consumer Financial Protection Bureau (CFPB) has issued subpoenas to U.S. auto lenders over the sale of extended warranties and other financial products.Meanwhile, the Justice Department is looking into auto dealerships that make their own loans to customers with poor credit and charge higher rates.
“Any new restrictions could affect millions of Americans who use loans to buy new and used vehicles each year. Add-on products, such as extra insurance, are a popular mechanism used by car dealers to boost profits.”
Though such products are legal, regulators are probing whether terms and prices are adequately disclosed. The CFPB has pursued a similar strategy with credit-card companies, fining them over the use of deceptive marketing practices to sell products like identity-theft protection.”
Roughly three-quarters of all new-vehicle purchases are financed or include add-on products, the National Automobile Dealers Association (NADA) told the Wall Street Journal.
Outstanding auto loans totaled $783 billion at the end of 2012, the most in nearly four years, says the Federal Reserve Bank of New York.