How to avoid a failure at auto loan?

How to avoid a failure at auto loan?

Congressmen The Republicans have never wanted the Consumer Protection Bureau and have been trying to weaken the agency since it was created in accordance with the Dodd-Frank Financial Reform Act of 2010. Next year, they are likely to step up their efforts with Donald Trump at the White House,
If successful, they will weaken the agency, which has proved its value again and again. Over the past five years, the bureau forced creditors to provide 11.7 billion dollars. USA for restitution and assistance to 27 million consumers for illegal practices related to mortgages, ransom, credit cards, student loans, payday loans and other forms of credit.
In fact, more federal regulation of consumer financial services is required, not less. It’s about sub-prime car loans sold to people with low credit ratings. Recently, the Federal Reserve Bank of New York expressed “serious concern” over the growth of delinquencies in such loans; about six million borrowers are on the verge of losing their cars. These offenses are growing, even when the unemployment rate is down, suggests that lenders have weakened their standards in order to “qualify” borrowers for more debt than they can afford. In the world of subprime auto loans, which are usually produced by non-bank financial companies, interest rates can reach up to 30 percent – the annual percentage is so high that the lender can make a profit even when many borrowers default. In addition, lenders, rather than holding on to loans that can expose them to losses, often pack them in securities and sell them to investors eager for high returns that they offer. Parallels with subprime mortgages are inaccurate; mortgage market, for example, dwarf car loans. But the similarity, including the provision of free loans to unsophisticated buyers, raises serious concerns.
What can the consumer bureau do? The answer is that this is not so much, and this is a big reason why subprime car loans cause concern. The Congress gave powers to the bureau for banks and non-bank financial companies. But this did not give the agency authorities over the car dealers. Auto dealers, who are generally prominent constituents in most areas of Congress, have successfully lobbied to be exempted from regulation by the bureau. This special treatment means relatively weak supervision of car loans, as many auto loans, although financed by regulated lenders, are organized by dealers, who often have the right to discretion under most credit terms.
Bust in sub-prime car loans, when this happens, will not destroy the economy, as did the mortgage bust. But this will harm millions of Americans. More and better financial supervision could help to avoid this result, but Congress intends to move in the opposite direction.

Leave a Reply

Your email address will not be published.