WASHINGTON (9/19/14)--The Consumer Financial Protection Bureau is proposing to oversee nonbank auto finance companies, and it also announced a lawsuit against an online payday lender this week.
The bureau also released a supervision report that details auto lending discrimination against banks, resulting in approximately $56 million in redress for as many as 190,000 consumers.
The proposed rule would allow the bureau to supervise nonbank auto finance companies that make, acquire or refinance 10,000 or more loans or leases in a year. The CFPB would be supervising them to ensure they are complying with federal consumer financial law.
According to CFPB estimates, about 38 auto finance companies would be subject to this new oversight. These companies originate around 90% of nonbank auto loans and leases, and in 2013 provided financing to approximately 6.8 million consumers.
Currently, the bureau supervises large banks making auto loans, but not nonbank auto finance companies. Under the Dodd-Frank Act, it has authority to supervise certain nonbanks the bureau defines through rulemaking as "larger participants" in a market.
The bureau's report details auto-lending discrimination uncovered at banks under CFPB supervision over the past two years.
Examiners found that these indirect auto lenders had discretionary pricing policies that resulted in discrimination against African-American, Hispanic, Asian and Pacific Islander borrowers. As a result, these borrowers paid more for their auto loans than similarly situated non-Hispanic white borrowers.
The CFPB announced in a separate statement that it is taking action to halt operations of an online payday lender. The bureau alleges that the Hydra Group is running an "illegal cash-grab scam," using information bought from online lead generators to access consumers' checking accounts to illegally deposit payday loans and withdraw fees without consent.
According to the CFPB, the Hydra Group then uses falsified loan documents to claim that the consumers had agreed to the phony online payday loans.
At the request of the bureau, a U.S. District Court judge has temporarily ordered a halt to the operation and frozen Hydra Group's assets. The lawsuit also seeks to return the ill-gotten gains to consumers and levy a fine on the company.
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