CFPB: Contested auto loans closed quickly, but flags hang around


According to a new study from the Consumer Financial Protection Bureau, about 17% of consumer credit disputes involving auto loans result in immediate loan closings, and an additional 4% are resolved three months after the customer alleges an error. More than 40% of auto loans with a litigation indicator were closed in four years, the agency said.

Auto loans were much more likely than other forms of debt to be closed when a customer raises an objection, although the litigation flag will remain, the CFPB has found. The other types of loans studied were more likely to be resolved with different methods, such as removing the dispute code, deleting the account, or not having new updates to the account, according to the CFPB.

“Part of the high rate of auto loan accounts closed is due to the relatively shorter duration of auto loans, as many of these accounts were repaid on the normal payment schedule,” the agency wrote. “Other closed auto loans go straight from a substantial balance to full payment, without proof of a lump sum payment.”

Consumers filed a credit dispute in about 0.75% of auto loans between 2012 and 2019, according to the CFPB. That number could potentially increase – the agency noted that credit complaints in general more than doubled in 2020.

“Because of the importance of credit reports to the consumer credit system, the accuracy of credit reports is an ongoing political concern,” the CFPB wrote in the introduction to its report. “Studies have found that a substantial minority of consumers have errors on their credit reports with the three National Consumer Reporting Agencies (CRAs), including errors that can significantly affect consumer credit scores. . “

According to the CFPB, the average car loan had been in place for more than two years before a dispute arose. Only 39 percent of those loans were first reported past due.

The office noted that its previous research had shown that actual payment information may be inconsistent and that some cases “were incorrectly marked as still open but were revised to appear as closed,” the agency wrote.

An example of this happened in federal court just two days after the agency announced its research.

Pennsylvania woman sued GM Financial and TransUnion in U.S. district court on Nov. 2, alleging the two failed to reflect her settlement of an overdue car loan of the company $ 10,124.71 of captive financing. Elizabeth Richardson said GM Financial eventually canceled the loan and agreed to settle it with a payment of $ 3,000 from her. However, she alleged, her credit report continued to show a debt of $ 7,124, reflecting a normal payment rather than a settlement amount.

Richardson has filed a Fair Credit Reporting Act litigation. Equifax and Experian have updated their records to either delete the account or mark it as paid. But GM Financial and TransUnion did not resolve the issue for that office within 30 days, she said, suing GM Financial for an alleged violation of the law and TransUnion for two.

GM Financial and TransUnion declined to comment on the pending litigation, in accordance with company policy.

The CFPB found that credit scores rose slightly after litigation, with the average car borrower scoring 596 and then gaining 6.3 points.

Customers raising disputes over their auto loans were more likely to be younger, to have deep subprime credit scores at the time of the loan, and to live in majority black census tracts. The CFPB noted that the proportion of auto credit protesters falling into the subprime category was about double that of “non-protesters,” and the proportion of people in predominantly black areas who filed auto credit disputes was more than three times the percentage of the majority. -white areas.

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