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Financial Services Law Insights and Observations

CFPB examines potential impact of high vehicle costs on consumers with deep subprime credit scores

Federal Issues CFPB Auto Finance Consumer Finance Consumer Reporting Agency Credit Scores

Federal Issues

On September 28, the CFPB published a blog post examining the potential impact of high vehicle costs on borrowers with deep subprime credit scores (credit scores below 540). The findings follow a separate recent CFPB blog post, which explored the potential relationship between high vehicle costs and changes in auto loan characteristics and performance (covered by InfoBytes here). Pointing out that many lenders do not provide information on deep subprime auto loans to consumer reporting agencies (CRAs), the Bureau’s newest findings rely on a statistical database containing information on vehicles and vehicle loans pulled from various sources, including vehicle titles and registrations, auto lenders, and auto manufacturers. The Bureau found that the median value of vehicles purchased by consumers with deep subprime credit scores has increased by roughly 60 percent since 2019, as compared to only a 30 percent increase for consumers with prime credit scores. The Bureau expressed concern that many consumers with deep subprime credit scores have been priced out of the auto loan market, noting that “the rapid increase in vehicle prices has had the largest impacts on the most vulnerable consumers.” The Bureau will continue to monitor these trends, but said the lack of data on monthly payments or delinquency rates for auto loans that are not furnished to CRAs limits its ability to study affordability concerns.