The auto finance market represents a significant component of consumer credit in the United States, with outstanding auto loan balances exceeding $1.64 trillion through the third quarter of 2024. This accounts for more than 100 million active auto finance accounts and $63 billion in new monthly originations as of April 2024. Despite its size, detailed data on the auto finance market remains limited.
To address this gap, the Consumer Financial Protection Bureau (CFPB) initiated the auto finance data pilot in February 2023. This program involved issuing nine market monitoring orders to banks, finance companies, and captive lenders, requesting data from January 2018 to December 2022. The pilot aims to shed light on key trends in the auto finance market, with the latest findings focused on repossession practices.
Key Findings from the ReportÂ
- Repossession Assignments Surpassing Pre-Pandemic Levels In December 2022, 0.75% of all outstanding loans were assigned to third parties for repossession, representing a 22.5% increase from the pre-pandemic level of 0.61% in December 2019.Â
- Decrease in Completed Repossession Assignments By September 2022, 27% of repossession assignments were completed, a decline from 38% in September 2019.Â
- Increased Use of Repossession Forwarders The use of third-party repossession services rose significantly, from 31% in January 2018 to 66% in December 2022. This increase correlated with higher repossession costs for consumers when forwarders were used.Â
- Repossession Redemption Trends In 2021, 34% of repossessions were redeemed by consumers, up from 25% in 2019. However, this rate fell to 30% by November 2022 as used car values declined.Â
- Deficiency Balance Fluctuations Average deficiency balances for accounts with outstanding balances post-repossession dropped during the pandemic as used car prices rose. Balances fell from $10,747 in December 2019 to $7,971 in December 2021 but climbed back to $11,340 by December 2022.Â
Consumer Risks Associated with RepossessionsÂ
Repossessions, like foreclosures and evictions, can be highly disruptive. Consumers risk losing access to their vehicles, potentially affecting their ability to work. They may also face additional financial burdens, such as outstanding balances and fees, as well as negative impacts on their credit scores. Despite its significance, the repossession process remains under-documented compared to other credit markets, limiting understanding of its full impact on consumers.Â
Challenges and LimitationsÂ
The dataset provides valuable insights but also highlights gaps in available data. For example, certain lenders only retained information on the most recent repossession assignment for accounts with multiple assignments. Additionally, some lenders did not document details for cancelled assignments, such as the status of the account at the time of assignment. These limitations underscore the need for more comprehensive data collection.Â
ConclusionÂ
The CFPB’s auto finance data pilot offers critical insights into the auto finance market, particularly repossession practices, and underscores the importance of transparent data to better understand consumer risks. For a more detailed examination of these findings, the full report is available here: CFPB Report on Repossession in Auto Finance.Â
Author:Â Jennifer Evancic
Jennifer.Evancic@ResourceManagement.com
Jennifer Evancic is a third-party auditor valued by creditors and large organizations for her knowledge in call monitoring within the collections industry. With meticulous attention to detail and a firm grasp of regulatory requirements, she ensures compliance with clients’ criteria and state and federal regulations.
Jennifer audits collections calls, ensuring they meet client-specific criteria and comply with regulations, providing valuable insights and maintaining industry standards.
Beyond her auditing responsibilities, Jennifer takes the lead in organizing and facilitating monthly call calibrations. These sessions serve as a collaborative forum where clients and their vendors come together to discuss call monitoring results and address any findings or areas for improvement. Jennifer’s guidance fosters open communication and ensures alignment between clients and vendors, driving continuous improvement in collections practices.
Jennifer stays up-to-date with compliance and industry best practices by participating regularly in peer meetings, regulatory updates and industry webinars. This keeps her informed about emerging issues and ensures she remains a knowledgeable leader in collections compliance.
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