Summary
The CFPB should create a large, robust and user-friendly public database for this uniquely high-pressure, low-transparency consumer credit market.
The National Community Reinvestment Coalition (NCRC) on Tuesday submitted a formal comment in response to a Consumer Financial Protection Bureau (CFPB) request for information regarding how it could publish a database on auto lending.
The comment letter lays out the reasons that the CFPB should create a database and provides specific suggestions. A database will increase transparency in the marketplace, leading to benefits for consumers, state regulators, investors and advocacy organizations. Purchasing a car is an unusually high-pressure transaction. Car companies are also often the provider of credit used by customers to buy new or used vehicles. The dealerships and salespeople facilitating these loans typically have intimate business ties to the lenders themselves, given the modern integration of car manufacturing and automobile lending.
Even a relatively well-informed potential buyer is “frequently at an information disadvantage when they seek a loan” as a result, the letter noted. This information asymmetry, layered atop the inherent pressure of many automobile purchases given many Americans’ dependence on vehicles and the potential conflicts of interest when salespeople are also acting as middlemen to corporate loan officers, means the process is likely “prone to unfair and deceptive practices,” NCRC wrote.
The CFPB should therefore create a large, robust and user-friendly public database that would allow people and organizations to see more clearly into this potentially-abusive category of vital consumer credit transactions, NCRC advised in the letter.
The full comment text can be read here on the web. A PDF form can be downloaded here.
