GM Financial Subpoenaed By DOJ In Subprime Lending Review
While the parent company goes through the federal ringer over product safety, GM Financial is under the gun after receiving a subpoena from the U.S. Department of Justice regarding potential deceptive practices in subprime lending.
The Detroit News reports the subpoena is part of a review “to determine if banks were misled into buying some auto loans,” according to General Motors. The subpoena was served July 28, requesting documents linked to the lending arm’s and affiliates’ subprime originations and securitizations going back to 2007.
The review in question is the DOJ’s investigation into potential violations of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, particularly around the underwriting criteria of said originations and “the representations and warranties relating to those underwriting criteria that were made in connection with the securitization of the automobile loan contracts.” The findings of the review could open the door to civil suits.
For GM Financial’s part, executive vice president and treasurer Susan Sheffield claimed the subpoena only focused on subprime lending issues in general, and not on the lender specifically. GM Financial represents 30 percent of all subprime lending to the parent company’s dealership network, and holds the title of second-largest subprime lender with $2 billion issued to-date in 2014.
Representatives for Chrysler Capital and Ford Credit both said their employers have not received a subpoena thus far.