Proposed CFPB rule change teases win for nonbank lenders

The Auto Finance Roadmap

Nonbank auto lenders may soon have a reason to celebrate, following a proposed rule change by the Consumer Financial Protection Bureau to how it defines larger participants of the auto market.

On Aug. 7, the bureau filed an advanced notice of proposed rulemaking to change the definition of a larger participant in auto to nonbank entities with up to 1.1 million aggregate annual originations, an increase from 10,000. This followed the CFPB’s July 14 motion filed with the Office of Management and Budget which would rule on the request.

The change, if approved, would reduce the number of financiers considered larger participants to five from 63, according to the notice. Traditional lenders and nonbank entities would still be subject to state laws even if they are no longer under CFPB jurisdiction.

While this unfolds, lenders are also working to seize opportunities in the market.

Auto lenders are continuing to lean into refinance programs on the heels of stabilizing interest rates and consumers’ search for affordability and better loan terms.

Subprime lender Arivo Acceptance Chief Executive Landon Starr told Auto Finance News that the company is ramping up its refinance program with a goal of $60 million in average monthly origination volume.

In fact, TransUnion estimates 18 million consumers, or 23% of borrowers with open auto loans, have interest rates that exceed the average APR in the industry.

Also, average vehicle transaction prices jumped 5.2% year over year in the second quarter to $31,216, according to an Edmunds report published Aug. 12.

In this episode of the “Weekly Wrap,” Auto Finance News Senior Associate Editor Truth Headlam and Associate Editor Aidan Bush discuss trends across second-quarter bank earnings for the week ended Aug. 15.