Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36For more information, please visit or 19 18 2016 Trends Like last year, inadequate or deceptive disclosures remained a focus area for enforcement in 2016. To that end, the CFPB also released a new “Know Before You Owe” initiative and a report on consumer experiences, aimed at improving the auto loan process for consum- ers. Enforcement agencies also focused on the risk of vehicle repossession and usurious lending. More emphasis was on origination than servicing. A notable difference from last year was the relative lack of focus on fair lending and auto dealer markup issues. Contemporaneously, there was continued scrutiny from the Republican-led House Committee on Financial Services, which issued a report in January 2016 highly critical of the name- and address-based statistical meth- odology employed by the CFBP in determining which borrowers are victims of discrimination. The Committee also approved the Financial Choice Act in September 2016, which would repeal the CFPB’s indirect auto lend- ing guidance (which critics allege should have gone through the rulemaking process). Another difference from last year is that the majority of auto loan actions tracked in 2016 were new lawsuits rather than settlements. Just over $43 million in relief was obtained in 2016, down from over $110 million in 2015. 2016 Highlights CFPB Proposes New Rule Addressing Auto Title Loans. In June 2016, the CFPB proposed a new rule to regulate small dollar lenders, including auto title lend- ers, as further discussed below. With respect to auto title loans in particular, the rule is intended to reduce vehicle repossessions that result when the consumer fails to timely repay their loan. One aspect of the rule to reduce repossessions is a prohibition on lenders retaining a security interest (and right to repossession) in a consumer’s vehicle for short-term loans that are of a length of 45 days or less. The proposed rule followed a report issued by the CFPB in May 2016 which found that one-in-five auto title loans resulted in repossession of the borrower’s vehicle. CFPB Sues Five Auto Title Lenders for Alleged Fail- ure to Disclose the APR. On September 21, the CFPB announced that it filed five individual administrative actions against auto title lenders in Arizona. Each suit alleges that the auto title lender’s online advertise- ments failed to disclose the annual percentage rates (APR), in violation of the Truth in Lending Act. In many cases, the lenders allegedly only disclosed monthly interest rates to borrowers. CFPB and DOJ Reach $21.9M Settlement with Toy- ota Motor Credit Corp. over Alleged Loan Pricing Discrimination. In February 2016, the CFPB and DOJ announced a joint settlement requiring Toyota Motor Credit Corp. to pay $21.9 million in restitution to minori- ty borrowers whose interest rates were, on average, 0.27% higher (for African-Americans) and 0.18% higher (for Asian and Pacific Islanders), resulting in thousands of minority borrowers paying as much as $200 more over the life of their auto loan. The agencies concluded that Toyota was discriminating against minority borrow- ers after they performed a portfolio-level analysis using name- and address-based proxies, a methodology that has come under intense criticism from industry groups. Looking Ahead to 2017 In 2017, we expect the CFPB to finalize its proposed rule regarding payday and auto title loans, and will be watching to see if it is challenged in court or through the legislative process under the new Trump Adminis- tration. The recent election may also open the door for Rep. Jeb Hensarling’s Financial Choice Act to become law, nullifying the CFPB’s indirect auto lending guid- ance. In response to a potential softening of federal enforcement under the new administration, states may start to play a larger role in auto lending enforcement than they have so far. Finally, state actions against auto lenders that charge interest rates prohibited by state law are likely to continue. auto loans In 2016, Goodwin tracked 16 auto lending enforcement actions, down from 20 such actions in 2015. The primary targets of enforcement were direct non-bank auto title lenders. Agencies overall were less active in policing fair lending and auto dealer markup issues in 2016. The CFPB was the most active enforcement agency, accounting for half of all actions, while state attorneys general were involved in just under a third of the actions. Agencies relied most heavily on the Truth in Lending Act (TILA), as alleged inadequate or deceptive disclosures remained a focus area for enforcement. The majority of auto lending actions were new lawsuits rather than settlements, which is uncommon when compared to enforcement actions involving other consumer credit products. Key regulatory developments that occurred in 2016 were the CFPB’s proposed small dollar lending rule that addressed auto title lenders, and Congressional efforts to change the CFPB’s approach to indirect auto lending. What to Watch CFPB to issue notice of proposed rulemaking | Continued scrutiny from state regulators | Increasing scrutiny from CFPB CREDIT CARDS AUTO LOANS TELEPHONE CONSUMER PROTECTION ACT CONSUMER FINANCIAL & PROTECTION BUREAU 0 5 10 15 20 FTCA FIRREA TILA RESPA ECOA CFPA FHA FCA State Statute or Regulation 18 8 10 11 5 12 12 3 5 5 5 5 4 1 1 3 1 1 - Statute Analysis Mortgage 0 1 2 3 4 5 6 7 8 Treasury Department State AG or Agency FTC DOJ / USAO CFPB 2A - Auto Agency Actions 2B - Auto Agency Actions Adjusted Number of Actions 2015 2016 2015 2016 7 8 8 7 1 7 7 1 Auto LOAN Agency Actions