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DOJ subpoenas GM Financial To Look Into Subprime Loans | DrivingSales News

DOJ subpoenas GM Financial To Look Into Subprime Loans

August 6, 2014 0 Comments

We previously bought you a story about how subprime auto lending in the United States has caused controversy. It was essentially a debate over who is to blame for people who can’t afford auto loans receiving them, the borrower or lender, however today’s issue why the U.S Government is showing interest once again in automotive lending institutions.

On July 28th 2014, General Motors Financial Company was served with a subpoena by the U.S Department of Justice. According to SEC filings, GM was directed  “to produce certain documents relating to its and its subsidiaries’ and affiliates’ origination and securitization of subprime automobile loan contracts since 2007.”

The federal government was invoked a legal demand to get it’s hands on auto lending documents. Does this situation ring any bells involving the Consumer Financial protection bureau? On December 20 of 2013, the CFPB ordered Ally bank, a powerful auto industry lender to pay $80 million dollars in fines due to allegations of discrimination. Those Allegations, we’re at best, difficult to prove. However, in that case, it was only alleged misconduct over the course of two years whereas the DOJ wants to go back seven years to find out how loans were presented to investors who sold them for securities.

Government inquiry or not, business it appears, is booming. A New York Times article explains that since 2009 auto loan securitizations have increased 150% to 17.6 billion in 2013. During the past two decades GM Financial has sold 65 billion in securities. Dealerships are the middlemen who deal directly with customers as they present them with loan terms and work with them to sign up for the auto loans. They are at the forefront of the success that occurring in the subprime auto lending business.

An article on this subjects ends with the suggestion that perhaps the Consumer Financial Protection Bureau should monitor more car dealers. What do you think? Should the CFPB be monitoring dealerships for loan fraud, or is this an example of the government looking unnecessarily into private business? The answer is as always, up to you.

 

About the Author:

The DrivingSales News team is dedicated to breaking the relevant and the tough stories affecting car dealers. Have questions for DrivingSales News? Reach the team at news@drivingsales.com.

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