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Platinum Auto Finance plans 8-state expansion
PenFed scales back balloon financing rollout
Indiana CU rolls out e-contracting to increase marketshare
Oregon CU customizes loan rates with new digital platform
Lenders dip down credit spectrum, boost originations in 2Q
As auto lenders opened their books of business to borrowers further down the credit spectrum, total auto debt increased 4.8% year over year to a record $1.3 trillion, according to the New York Federal Reserve Quarterly Report on Household Debt and Credit.
The report, which uses data from Equifax, showed that auto debt from loans and leases continued to rise as auto lenders originated $156 billion in the second quarter, up from $139 billion in the previous quarter. Meanwhile, the median credit score continued its downward trajectory, falling to 703 in the second quarter from 708 in the first quarter.
Furthermore, N.Y. Fed economists pointed out that auto loans are grabbing a historically larger share of the outstanding “severely derogatory balance” — those loans that are more than 30 days delinquent or have been charged off or repossessed. In the second quarter, auto loans held 21% of the total share, which includes mortgages, credit cards, student loans and revolving debt.
However, serious delinquency rates can be misleading between different credit segments, the economists wrote in an accompanying blog post. One such example is that student loans are typically reported as defaulted after a full year, or 360 days past due, while auto loans usually charge off more quickly, typically before they reach 120 past due. As such, the Fed has put a greater focus on delinquency transition rates. From that perspective, the percent of auto loans transitioning into 30-day delinquency stayed relatively flat at 7%; those that flowed into 90-day delinquency experienced a slight seasonal decline, hovering just above 2%.
Court decision muddles proposed FDCPA rule
A ruling from the Seventh Circuit Court of Appeals could complicate the Consumer Financial Protection Bureau’s proposed guidelines for the Fair Debt Collection Practices Act as it relates to electronic validation notices, Chris Willis, a partner at Ballard Spahr LLP, told Auto Finance News.
“[The decision] is throwing a fly in the CFPB’s ointment for what they proposed in their rules back in May,” Willis said.
The proposed rule issued by the CFPB would allow debt collectors to send validation notices — or formal communications of debt — electronically in one of two ways: either pasted as plain text in the body of an email or via a secure hyperlink through email or text message.
In this recent case, a debt collector sent the plaintiff a validation notice through a hyperlink in an email, which the plaintiff never opened. After subsequent communication with the debt collector, the plaintiff sued claiming she was never provided a validation notice.
Read the court’s decision at our sister site, Auto Finance Excellence, here.