As discussed here, in February 2023, the Consumer Financial Protection Bureau (CFPB or Bureau) launched the auto finance data pilot and issued nine market monitoring orders to three banks, three finance companies, and three captive lenders. This initiative aimed to gather comprehensive data on auto lending portfolios. Yesterday, the CFPB issued a Repossession in Auto Finance report using the dataset to show that repossession assignments increased for certain consumers post-2020, but many consumers avoided repossession in parts of 2021 and 2022. The data also indicates that repossession forwarders were increasingly involved in repossession activity, potentially resulting in increased repossession costs passed on to consumers.
Key findings from the report, include:
- Increase in Repossession Assignments: Repossession assignments surpassed pre-pandemic levels in 2022. In December 2022, 0.75% of all outstanding loans were enough days past due that the lender assigned the vehicle to a third party for repossession. This represents a 22.5% increase from the December 2019 level of 0.61%.
- Decrease in Repossession Completion: The share of repossession assignments completed decreased in 2022 compared to 2019. In September 2022, 27% of accounts assigned to repossession were completed, a decrease from the completion of 38% of repossession assignments in September 2019.
- Increased Use of Repossession Forwarders: The use of third-party repossession and recovery management services (repossession forwarders) by lenders in the dataset increased from 31% in January 2018 to 66% in December 2022. The use of repossession forwarders peaked at 69% in October 2022. Average repossession costs charged to consumers were higher when a forwarder was used.
- Repossession Redemption Rates: Consumers in 2021 were more likely to make payments sufficient to regain possession of their vehicle after a repossession had occurred than pre-pandemic. Thirty-four percent of repossessions completed in December 2021 were redeemed, an increase from 25% in December 2019. However, redemptions fell to 30% by November 2022.
- Rising Deficiency Balances: Average outstanding balances for consumers with outstanding balances on their accounts after a vehicle was repossessed and sold by the lender were rising prior to 2020, then fell as used car prices increased post-pandemic. Average deficiency balances among consumers with a deficiency balance in December 2019 were $10,747 but fell to $7,971 by December 2021. The average deficiency balance sharply increased throughout 2022, surpassing non-inflation adjusted 2019 levels at $11,340 by December 2022.