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Car loans under CFPB scrutiny

By Tara Baukus Mello · Bankrate.com
Wednesday, March 20, 2013
Posted: 10 am ET

At least four banks are being investigated for possible discrimination against certain new-car buyers by unfairly marking up interest rates on their car loans. According to a Bloomberg report in late February, the Consumer Financial Protection Bureau, or  CFPB, was looking into discriminatory practices on car loans. Since the initial report, Ally Financial has said in a government filing that it is being investigated by the CFPB for some of its retail financing practices.

The CFPB was established as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Among the federal agency's duties are to write rules and enforce federal consumer protection laws as well as to investigate consumer complaints of unfair, deceptive or abusive acts or practices among companies that provide all types of consumer financial products or services, including new- and used-car loans.

Parts of the law have been contested by the banking industry. But when it originally was written, auto dealers were excluded from the oversight of the CFPB. However, banks weren't, and the CFPB has been fielding complaints about auto loans from banking institutions.

Do you have a car loan from the bank? Do you think you were treated fairly?

Tara Baukus Mello writes the cars blog as well as the weekly Driving for Dollars column, providing both practical financial advice for consumers as well as insight into the latest developments in the automotive world. Follow her on Facebook here or on Twitter @SheDrives.

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15 Comments
Pie in the Sky
March 27, 2013 at 11:50 am

The above scenarios are not what the CFPB are targeting. First, the consumers this agency is attempting to protect are those who do not have good credit and are being targeted by deceptive and abusive lending practices. The most common target are those dealers that fall under the buy-here; pay-here financing offers. Not to say that all dealers under this system are deceptive or abusive- the CFPB is simply asking that these financing arragements are further disclosed so a prospective consumer knows what happens when they pay and when they don't pay and how much each will cost them. My thinking is that most consumers in a credit challenged situation will still choose any financing arrangment that will allow them to get wheels...no matter what the cost or terms. The CFPB certainly sounds good; but it may just be pie in the sky in the long run.

JOSEPH AGRILLO
March 22, 2013 at 10:27 am

PLEAS TELL WHAT ME IS THE -PBFP

R. Thomas
March 22, 2013 at 10:13 am

Go to your local Credit Union and get pre-approved loan by them and then take your credit union check with you to the dealer and barter like hell! Be prepared to walk away if you don't like the deal. Cut the bank out of it completely, you will probably get a much better interest rate and remember Credit Unions are not-for-profit, unlike the greedy banks! Arm yourself first with a loan that you can afford and the interest rate that you like - I have always used my credit union, not to mention they offer a lot of things like extended warranties on used cars that cost half the price that the dealer charges (same darned warranty too)! Good Luck

nilo
March 22, 2013 at 8:55 am

We need people like you running this country....

Know Your Credit Score
March 22, 2013 at 7:46 am

I bought a 2012 Honda December 29, 2011 when Honda was promoting 0.9% interest for those who qualify. With a credit score of 830, I knew I qualified. Before I entered the dealership, I researched online and knew exactly what I was going to pay for the car I wanted...not a penny more. When I spoke to the sales person, I made it clear that I knew I qualified for the 0.9% interest and laid out my terms (or I would walk) simple as that. I ended up financing through Honda with a 0.9% and didn't pay a penny more than I anticipated for the car I wanted. I put $10K down; my monthly payments were $468/mo. I made $1,000 payments (plus interest) every month (the extra dollars went towards the principle) and paid my car off 3 weeks ago. You've got to be prepared (before you walk onto the lot) and stand your ground...or be prepared to walk away. If the car dealership (or bank) is dishonest, cancel your order.