As Auto Loans Hit New Highs, Regulators Seek Details from Banks to Gauge Risk Exposure

U.S. auto loan balances are reaching new highs every quarter, and delinquency rates are starting to nudge upward. That combination is worrying bank regulators.

A report by Reuters says that U.S. regulators are asking banks for details on their risk exposures tied to auto financing as the number of subprime borrowers is also surging.
Outstanding balances on auto loans have shot up by a third since April 2011, hitting an all-time high of $924.2 billion in August, according to credit reporting bureau Equifax.
About a fifth of the loans are subprime.
Regulators fear that reckless lending could be partly responsible for the rapid growth in auto financing, Reuters reports.
Soaring auto loan balances has also prompted the U.S. Consumer Financial Protection Bureau to announce last month that it is seeking authority over “nonbank” auto finance companies.
The CFPB currently supervises large banks that make auto loans but not nonbank companies through which many dealers arrange financing for customers.
Auto loans are financed by both banks and nonbanks.
“Many people depend on auto financing to pay for the car they need to get to work,” said CFPB Director Richard Cordray last month. “Nonbank auto finance companies extend hundreds of billions of dollars in credit to American consumers, yet they have never been supervised at the federal level.”

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