On November 17, the Consumer Financial Protection Bureau (CFPB) announced it is seeking public comment on its proposal to develop a new data set to better monitor the auto loan market. According to the CFPB, greater visibility into market trends would allow lenders and investors to spot emerging opportunities, improve risk management practices, and ultimately expand access to credit and refinancing. The CFPB will be accepting comments on its proposal until December 19.

The CFPB explained its main reasoning behind the proposed new data collection as follows: “Financial markets and policymakers have long had access to granular mortgage data that has provided insight into patterns in lending and risk. Because student loans are largely administered by the federal government, we know more about them too. But, despite its size, we know much less about the auto lending market. As a result, the CFPB is announcing an effort to work with industry and other agencies to develop a new data set to better monitor the auto loan market.”

Another reason the CFPB states is behind the proposed data collection is the purported rapid changes in the industry. According to the CFPB, auto lending represents approximately one-third of nonmortgage consumer debt, and the amount of outstanding loans has doubled over the last 10 years. Over the past two years, car prices have risen significantly, leading to larger loan amounts and higher monthly payments. The CFPB states these loan size increases are beginning to negatively impact consumers and households, including an increase in auto loan delinquencies and some consumers being priced out of the market.

According to the CFPB, the available data allows market participants to identify and measure certain trends but is insufficiently granular to fully explore the cause of those trends. For example, publicly available repossession data is based on proprietary estimates and does not provide a level of specificity that allows for deeper analysis. Likewise, while the CFPB’s consumer credit panel (a 1-in-48 sample of consumer credit report data from one of the three nationwide consumer reporting agencies) can fill in some of the gaps, many auto loans are made to consumers with subprime or deep subprime credit scores from lenders that do not furnish data on those loans to credit reporting agencies. The CFPB claims this lack of data could lead to negative consequences for consumers, lenders, and investors, pointing to the lack of visibility into the mortgage market that was a key issue leading up to the Great Recession in 2008.

The proposed data set may include, for example, collecting retrospective data from a sample of lenders that represent a cross section of the auto lending market. Before doing that, the CFPB is gathering input from stakeholders and the public on the current data landscape.

Auto finance continues to be on the top of the CFPB’s radar. As we discussed here, in September 2022, the agency released a blog post, exploring the potential relationship between rising car prices and changes in auto loan performance. Earlier in February 2022, discussed here, it posted about its regulatory priorities in the auto finance market, including steps that the CFPB planned to take to make the market, in its view, more fair, transparent, and competitive.

Troutman Pepper will continue to monitor important developments involving the CFPB and the proposed data collection and will provide further updates as they become available.