On February 24, 2015, Capital One Financial Corporation disclosed in its annual SEC 10-K filing that in early 2015 it had received subpoenas related to the bank’s subprime auto financing and securitization activities from the New Jersey office of the Department of Justice (DOJ) and the New York district attorney’s office. The subpoenas sought information on the bank’s subprime auto origination and securitization practices. Capital One stated that it is cooperating with both investigations.
The next day, on February 25, 2015, Consumer Portfolio Services, Inc. (CPS), a national lender and securitizer of automobile loans, disclosed in its annual SEC 10-K filing that in January 2015 it had received a subpoena issued by the DOJ for documents regarding its origination and securitization of subprime auto loans. The subpoena requested information regarding CPS and its affiliates’ underwriting practices and the representations and warranties made regarding the underwriting practices in connection with the securitization of those auto loans. According to the filing, the subpoena stated that the investigation was proceeding under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). CPS stated that it was cooperating with the investigation.
LenderLaw Watch has previously reported on similar investigations into subprime auto lenders by the DOJ. These recent disclosures further demonstrate that the DOJ and other government agencies are increasingly targeting auto lenders. The CPS disclosure also confirms what LenderLaw Watch previously predicted, which is that FIRREA remains an active tool for the DOJ that it is likely to continue to wield in post-recession era investigations. Subprime auto lenders that have yet to be subjected to a government investigation should be aware of this trend and for any potential investigations.
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