CFPB Releases Auto Title Report; Sets Date for Small Dollar Lending Field Hearing

CFPB Auto Finance

On May 18, the CFPB issued a report titled “Single-Payment Vehicle Title Lending.” The report provides an overview of the CFPB’s analysis of “de-identified data from vehicle title lenders consisting of nearly 3.5 million loans made to over 400,000 borrowers in ten states during 2010-2013.” The CFPB examined loan patterns (re-borrowing and rates of default) for single-payment auto loan titles. A loan contained in the CFPB’s study has three possible outcomes: (i) repaid without subsequent borrowing; (ii) default; or (iii) re-borrowing on the same day or within a certain specified period (14, 30, or 60 days) of time after repayment. According to the report, auto title loans have high rates of consumers re-borrowing: “[o]ver 80% of vehicle title loans are re-borrowed on the same day a previous loan is repaid, and 87% of loans are re-borrowed within 60 days.” The CFPB further contends that only about one in every eight loan sequences is repaid without a consumer having to re-borrow. Additional findings highlighted in the report include: (i) approximately one-third of loan sequences default, with one in every five borrowers having a vehicle repossessed by the lender for failure to repay; and (ii) approximately two-thirds of the loans are in sequences of seven loans or more and about half are in sequences of ten or more loans, with no more than 15% of the sequences maintaining three loans or fewer.

Also on May 18, the CFPB announced that, on June 2, 2016, it will hold a field hearing about small dollar lending in Kansas City, MO. It is widely anticipated that the CFPB will announce its proposal on small dollar lending products during this hearing. Notably, the CFPB’s auto title loan findings are not dissimilar to the findings outlined in the agency’s recent “Online Payday Loan Payments” report. The data analysis from each report will likely influence the lender requirements included in the CFPB’s expected proposal on the small dollar lending industry.