Since the start of the pandemic, the cost of automobiles has increased dramatically. More than 100 million Americans have a car loan, and the CFPB estimates that there is currently $1.5 trillion in car loans outstanding, making it the third largest category of consumer credit after loans. mortgages and student loans. On its current trajectory, auto loan balances will exceed outstanding student loans in the first half of 2023.
Financial markets and policymakers have long had access to granular mortgage data that has provided insight into lending and risk patterns. Since student loans are largely administered by the federal government, we also know more about them. But, despite its size, much less is known about the auto loan market. Accordingly, the CFPB announces a collaborative effort with industry and other agencies to develop a new dataset to better monitor the auto loan market.
The evolution of the car loan market
Automobile credit accounts for approximately one-third of non-mortgage consumer debt and the amount of outstanding loans has double over the past 10 years. More recently, the automotive market has undergone substantial and rapid changes. Over the past two years, car prices have risen dramatically, leading to larger loan amounts and higher monthly payments. These increases in the amount of loans are beginning to have an impact on consumers and households. Recent data shows an increase in delinquencies on auto loans, especially for low-income consumers and those with subprime credit ratings. We also see evidence that some consumers may be excluded from the current market.
Although the data currently available allows market participants to identify and measure certain trends, it is not granular or comprehensive enough to fully explore the cause of these trends. Additionally, rapid industry changes over the past few years have made visibility into market trends increasingly difficult.
Data gaps
Compared to mortgages, credit cards, and student loans, data available to market participants, investors, and regulators in the auto loan market is relatively sparse. Trade data is often highly aggregated, which limits the ability of market participants to perform their own independent summaries and analyses. For example, publicly available repossession data is based on proprietary estimates and does not provide a level of granularity for further analysis.
Similarly, the CFPB Consumer Credit Panel, which is a 1 in 48 sample of consumer credit report data from one of three national consumer reporting agencies, can address some of the shortcomings. However, many auto loans are made to consumers with deep subprime or subprime credit scores from lenders who do not provide data on these loans to credit reporting agencies.
Without this holistic view, market participants are unable to identify emerging risks and opportunities as they arise. This could lead to negative consequences for consumers, lenders and investors. For example, lack of visibility into the mortgage market was a key issue that led to the Great Recession of 2008. In response, federal regulators took steps to expand and combine mortgage data sets to better inform the public, market players and regulators. . A better understanding of the underlying data can also support a more competitive automotive market. With greater visibility into market trends, lenders and investors can spot emerging opportunities, improve risk management practices, and ultimately expand access to credit (including refinancing).
Collect data to create a new dataset
The CFPB seeks to build a new set of data that will enable a more robust understanding of market trends. This may include, for example, collecting retrospective data from a sample of lenders who represent a representative sample of the auto loan market.
Before doing this, we will bring stakeholders together to gather feedback on our current data landscape. We are too solicit public opinion . Submissions will be accepted through December 19, 2022. You may submit responsive information and other comments, identified by File No. CFPB-2022-0075 by any of the following methods:
- Federal Electronic Rulemaking Portal : Follow the instructions for submitting comments.
- Email: [email protected] Include case number CFPB-2022-0075 in the subject line of the message.
- Mail/Hand Delivery/Courier: Receiving Feedback: Auto Loan Data Gaps, Consumer Financial Protection Bureau, 1700 G Street NW, Washington, DC 20552.
Guidelines: The CFPB encourages prompt submission of comments. All submissions must include the document title and file number. In general, all comments received will be posted unchanged on https://www.regulations.gov .
All submissions, including attachments and other supporting documents, will become part of the public record and subject to public disclosure. Proprietary information or sensitive personal information, such as account numbers or social security numbers, or the names of other people, should not be included. Submissions will not be edited to remove any identifying or contact information.
