PERO via Shutterstock.com

Auto Loan Complaints Rise

Pandemic worsens existing consumer problems with car buying in CFPB data

Financing the purchase of a car is a minefield for consumers at even the best of times. Tricks and traps in the auto marketplace can leave consumers paying more for a car than they should — or, worse, being victimized by predatory and abusive practices by auto dealers and lenders.

COVID-19 has left consumers even more vulnerable. A review of complaints to the Consumer Financial Protection Bureau’s (CFPB) Consumer Complaint Database reveals a sharp spike in consumer complaints about auto purchasing, leasing and finance since the beginning of the pandemic.

Use the dropdown menu below to see more information for the most complained-about 15 companies

2,347 vehicle loan and lease complaints

Harmful auto loan practices targeted by CFPB enforcement action: Failed to properly describe "the benefits and limitations of its S-GUARD GAP product, which it offered as an add-on to its auto loan products." (November 2018)

1,437 vehicle loan and lease complaints

Harmful auto loan practices targeted by CFPB enforcement action: “Discriminatory auto loan pricing practices harming African-American, Hispanic, and Asian and Pacific Islander consumers.” (December 2013)

938 vehicle loan and lease complaints

934 vehicle loan and lease complaints

Harmful auto loan practices targeted by CFPB enforcement action: “[V]iolated the Consumer Financial Protection Act (CFPA) in the way it administered a mandatory insurance program related to its auto loans” (April 2018). Participated in "an illegal marketing-services-kickback scheme" (January 2015).

806 vehicle loan and lease complaints

742 vehicle loan and lease complaints

Harmful auto loan practices targeted by CFPB enforcement action: Charged African-American, Asian and Pacific Islander "higher interest rates than white borrowers for their auto loans, without regard to their creditworthiness." (February 2016)

677 vehicle loan and lease complaints

539 vehicle loan and lease complaints

515 vehicle loan and lease complaints

465 vehicle loan and lease complaints

Harmful auto loan practices targeted by CFPB enforcement action: Pressured borrowers "using illegal debt collection tactics." (September 2015)

453 vehicle loan and lease complaints

Harmful auto loan practices targeted by CFPB enforcement action: Harmed African-American, Hispanic, and Asian and Pacific Islander borrowers with discriminatory auto loan pricing. (July 2015)

302 vehicle loan and lease complaints

297 vehicle loan and lease complaints

Harmful auto loan practices targeted by CFPB enforcement action: Used "deceptive marketing and lending practices targeting active-duty military." (June 2013)

280 vehicle loan and lease complaints

Consumer complaints on the rise

Consumer complaints about auto lending and leasing have increased dramatically during the COVID-19 pandemic. 

  • From March through July of 2020, consumers submitted more than 2,800 auto loan and lease complaints — more than any other five-month period in the history of the Consumer Complaint Database.
  • Complaints about being denied auto loan payment relief surged to double pre-pandemic volumes.
  • Since March 1, more than 1 in 5 auto loan and lease complaint narratives have mentioned the COVID-19 pandemic.
A pattern of abuse

The Consumer Complaint Database reveals a pattern of scams and abusive practices by banks, captive finance companies, and subprime lenders.

  • Deceptive add-ons. Dealers will often attempt to sell consumers expensive add-on products such as extended warranties, service plans and insurance products. Of complaints in the CFPB database related to add-on products, 29 percent include the term “warranty” and 39 percent include the term “insurance.”
  • High-pressure or deceptive sales tactics. In complaint narratives, consumers describe feeling pressured into expensive loans and add-on products.
  • Broken billing and payment systems. More than 1 in 5 auto loan and lease complaints are cataloged as having to do with a “billing problem,” and 42 percent of billing complaint narratives mention the term “late,” as many consumers describe broken billing systems causing late fees.
  • Harassment over repossessions and debt collection. Consumers have submitted more than 5,000 complaints regarding debt collection for auto debt, nearly half (45 percent) of which involve harassing behavior by collectors.
  • Yo-yo financing and changing loan terms. More than 280 complaints are about loan terms changing during or after closing — a common tactic used by dealers or lenders to get consumers to accept a higher interest rate than they’d initially been quoted. Some complaints describe “yo-yo financing,” in which a dealer tries to change loan terms after a consumer has already driven off in their vehicle.
More Americans are vulnerable

Rising auto debt and the COVID-19 pandemic leave a growing share of Americans vulnerable to problems with car loans. 

  • The amount of outstanding auto debt has risen more than 85 percent since the end of 2009, while the number of Americans holding auto debt reached a record high in early 2020.
  • Even before the pandemic started, more than 5 percent of auto loans were at least 90 days delinquent.
  • Longer loan terms and expensive add-on products leave more Americans owing more on their vehicles than they are worth — exacerbating their vulnerability to economic shocks such as the COVID-19 pandemic.
  • The automobile-dependent design of America’s cities and transportation networks leave many Americans with little choice but to go into debt to own a car. The financial crisis facing transit agencies during COVID-19 could leave even more Americans financially vulnerable due to car dependence.
Recommendations

Each year, roughly 60 million Americans buy or lease a vehicle. These consumers deserve protections from the scams and abuse that are all too common in America’s current vehicle finance marketplace — and special protection during the COVID-19 crisis. To protect consumers from auto marketplace scams, policymakers must step up enforcement of consumer protection laws.

Specifically:

  • For the duration of the pandemic, policymakers must guarantee access to loan relief programs, while banning repossessions, debt collection, and negative credit reporting.
  • Policymakers must also take permanent action to protect consumers from predatory or abusive auto loan practices, including by closing loopholes that allow excessive interest rates, and stepping up enforcement of existing laws.
  • Policymakers must make it easier to avoid car ownership, including by expanding transit — and minimally ensuring that COVID-19 does not result in slashed transit service.