Equifax Economist Defends Subprime Auto

Dennis Carlson, deputy chief economist at Equifax, is the latest industry analyst to defend subprime auto from accusations of being a ‘bubble’ akin to the crisis that brought down the mortgage industry before the Great Recession.

Carlson’s defense came during his presentation at the Consumer Bankers Association Live 2015 conference Monday.

Many subprime auto critics claim that poor choices made by lenders since the recession have led to a bubble, he said, but he refuted the charge, citing data compiled by Equifax in which a test group of “deep subprime consumers” who originated auto loans in 2010, actually increased their credit score by an average of 52% over three years.

Specifically the data, from a report in mid-February titled Subprime Auto Loans: A Second Chance at Economic Opportunity, showed that the consumers, who had Equifax Risk Scores below 550, showed a 62.5% improvement in their scores over a sampling of peers that did not take out an auto loan in that time period.

“This distinction is critical as it affords them much greater access to credit and therefore an improved economic situation,” the report read.

Carlson also mentioned a series of articles published in The New York Times last year, which likened conditions in subprime auto to those that brought about the mortgage crisis before the Great Recession.

“I could probably talk for 30 minutes alone on why that’s not the case,” Carlson said. “But I won’t.”

Learn more about risk and compliance in auto finance May 18 and 19 at the Auto Finance Risk & Compliance Summit 2015 in San Diego. Register here.