In June, the Consumer Financial Protection Bureau shared seven initial findings from its Auto Finance Data Pilot, deployed in February 2023.

A trio of consumer advocates believe the CFPB’s work on this project is far from complete.

Those organizations recently sent a letter to the bureau, asking the regulator to gain more information about an array of sectors, ranging from repossessions to buy-here, pay-here dealerships to military servicemembers.

The letter came from the Consumer Federation of America, the National Consumer Law Center and Americans for Financial Reform Education Fund.

“The undersigned organizations have a long history of advocating for consumer protections in auto sales and finance, particularly as they affect low-income and consumers of color,” the organizations wrote.

“Despite auto loans being the top source of non-mortgage debt in our nation and of special importance to low and moderate income households, the public lacks access to uniform, objective data about auto financing that would serve to educate regulators, legislators, and policymakers about important trends and inform necessary action,” they continued.

Most of the initial findings from the CFPB revolved around negative equity, discovering more than 10% of contracts originated between 2018 and 2022 had a balance rolled into the new financing.

Meanwhile, these consumer advocates are concerned about what else happens in the finance office, in particular warranties and other products.

“Expensive add-ons are often sold at incredibly high prices while providing little to no value to the purchaser, and data about add-ons across the marketplace is extremely limited,” the organizations wrote in their letter. “We urge the bureau to publish information from the Data Pilot about the widely varying costs of common products, such as VIN etching, GAP products, service contracts, and others, as well as how the costs relate to the profile of the borrower.

“The bureau should also evaluate the relationship of add-ons to the origination and performance of finance contracts, as they often increase the cost of financing by thousands of dollars. We encourage the bureau to relate these findings about costs and outcomes to the geographic location of the borrower as much as possible, such as by the ZIP code of the borrower and the original dealer,” they continued.

Once the paper is bought by the finance company, the Consumer Federation of America, the National Consumer Law Center and Americans for Financial Reform Education Fund want the CFPB to investigate more about the exchange between dealers and lenders.

“The relationship between the original creditors of these finance contracts, auto dealers, and their assignees, finance entities, directly impacts consumer outcomes by injecting pricing variables. We urge the bureau to publish information about parts of these relationships that have eluded comprehensive analysis due to tightly guarded ‘proprietary’ agreements and contractual relationships,” the organizations wrote.

“The use of interest rate markups has a tremendous impact on both the performance of auto finance and the lives of consumers,” they continued. “Subprime auto finance often involves finance entities buying retail installment sales contracts from dealers at below face value or else pay an “acquisition fee” to the assignee when the RISC is sold. For some, the amount paid by the assignee to the dealer is reduced by amounts described as ‘dealer reserve.’

“Other finance entities reduce the amount paid by the assignee to the dealer by deducting amounts described as ‘loss reserve.’ Some impose an ‘increased risk charge.’ Some have complex agreements where various amounts are retained by the assignee with some of them released to the dealer if the consumer pays in full. By necessity dealers raise the price of vehicles to cover these costs,” the organizations went on to say.

“The bureau should publish information about the payments and credits exchanged between the dealer and assignee, the dealer interest rate markups and dealer reserve amounts, how those amounts vary based on the geographic location of the borrower and other borrower profile characteristics, and how those amounts correlate to consumer outcomes,” they added.

And when the consumer no longer makes their monthly payments, the Consumer Federation of America, the National Consumer Law Center and Americans for Financial Reform Education Fund want the CFPB to investigate further about what finance companies do next.

“A repossession begins an entire second life cycle for a debt that follows a consumer for many years with devastating consequences. The bureau’s Data Pilot includes a wealth of information about repossessions (and ‘voluntary surrenders’), and we look forward to a fulsome report about these practices,” the organizations wrote.

“We asked for information about consumers who are able to cure their default before repossession or reinstate during or after the repossession process in addition to redemptions after repossession. The bureau does not appear to have requested this more nuanced information in the Data Pilot, and instead asks about the date that a repossession was canceled, or an account was redeemed,” they continued.

“We urge the bureau to obtain this information in future data collection efforts, as it is an important mechanism that can shield consumers from unnecessary and overly aggressive repossessions that deprive them of their access to a vehicle which is often critical to maintain employment in order to make their payments,” the organizations went on to say.

Furthermore, the Consumer Federation of America, the National Consumer Law Center and Americans for Financial Reform Education Fund touched on a couple of other noteworthy constituencies, including:

—Military servicemembers: “The bureau has published data regarding the impact of auto finance on servicemembers, noting that younger servicemembers tend to purchase and finance vehicles soon after joining the military, and carry more debt than their civilian peers. Financing practices directly impact our national security by jeopardizing the financial readiness of servicemembers and their families. We would urge the bureau to publish data regarding servicemembers based on its requests for the military status of the borrowers and co-borrowers and information about the borrower’s source of income.”

—BHPH dealerships: “Our December 2022 and March 2024 comments both expound upon the need for data from these dealers, where fraud and abuse frequently proliferate but often go unchecked. We urge the bureau to expand its data collection beyond those dealers that make 500 loans or more per year, as many BHPH dealers will fall below this threshold. In addition to those comments, we note here that BHPH dealers (and other auto dealers) have a reputation for including pre-dispute arbitration clauses in their contracts, but failing to honor the terms of those agreements when faced with an arbitration demand from a consumer. Some BHPH dealers refuse to pay the fee to initiate the arbitration, despite a clear requirement in the contract or from the selected arbitration company. This has cascading problematic consequences for consumers and their access to justice through counsel, as it intentionally slows down the litigation process and impedes access to their vehicle altogether.”

The entire letter can be found here.