Podcast: ‘Weekly Wrap’ speaks to Toyota CFPB oversight, subprime credit tightening

Riley Wolfbauer 0:09 Hello everyone and welcome to the roadmap from auto finance news since 1996, the nation’s leading newsletter on automotive lending and leasing. It is Monday, November 27. And I’m Riley Woflbauer joined by Amanda Harris. This is our weekly wrap on what happened in auto finance for the week ending November 24 2023. This episode is sponsored by software solutions provider and Nova tech. In compliance news, the Consumer Financial Protection Bureau ordered Toyota Motor Credit Corp to pay $60 million for infractions related to ancillary products and bad data reporting to consumer credit reporting agencies, the CFPB found for violations in its review of Toyota Motor Credit. According to the release from the bureau. The bureau alleges that Toyota Motor Credit harmed consumers by preventing them for canceling product bundles, including guaranteed asset protection products and credit life and accidental health coverage by making the cancellation process unreasonably difficult. The bureau also accused Toyota Motor Credit of delaying bundled product refunds by applying them to principal payments, along with withholding refunds or district distributing incorrect refund amounts. The CFPB also alleges that the lender inaccurately reported customer delinquencies to credit reporting agencies. Plano Texas based Toyota Motor Credit admitted no wrongdoing but agreed to pay $48 million to affected consumers and $12 million to the CFPB victim relief fund for violations found in the investigation. Vincent Bray, Senior Manager of corporate communications at Toyota Financial Services told Auto Finance News The settlement comes as the Bureau has stepped up its auto finance oversight and electric vehicle news Evie financing company Tennant secured $30 million in funding on November 15. The company was approved for a $20 million warehouse debt facility from Silicon Valley Bank now a division of First Citizens Bank following SV B’s collapse in March and also received a $10 million series A investment led by venture capital firm Nika partner. Tenants loan so capacity now stands at a total of $100 million. The company is using the funding to increase origination volume and scale its renewable energy platform, tenant connect and auto lending US Bank laid off a portion of its own division as the bank continues its pullback in auto finance to other lines of business. The layoffs hit nearly half of the auto divisions employees. Sources familiar with the matter told Auto Finance News, a US Bank spokesperson confirmed the layoffs but declined to provide details as to how many people were affected. Last week, Amanda spoke with a few subprime lenders on the current market and what they’re doing to adjust underwriting. Amanda was going on there. Amanda Harris 2:58 Sure, so if anyone’s read our feature, you know, and probably even if you haven’t, you know the subprime market is pretty challenging right now for borrowers, you know, inflationary pressures, making it very difficult for them to afford, you know, everyday expenses, probably even more so than borrowers and other credit tiers. So subprime lenders are having to adjust to, to the market conditions. So I spoke with two I spoke with Irving, Texas based on the road lending, which is a nonprofit subprime auto lender, they have clients, you know, their FICO scores are in the low five hundreds, again, they’re nonprofits, they get their capital, you know, mainly from from lenders and captives who have a goal to kind of help these underserved populations. But even they had to adjust. So they had to change their minimum income requirement up to 1800 from 1500 per month, pretty tight for you know, their typical clients based on either last year end of year report to their clients typically had an annual income of just over 40,000, a year in 2022. So you imagine that about $3 more per month, definitely a little bit tight for them. They also did adopt a range of interest rates just like pretty much based on equity in the vehicle. So someone does a higher down payment, they wanted to be able to offer a lower rate before they did have a flat interest rate. So they’re doing some things to try to offset some of the affordability concerns, but also, you know, knowing that they’re taking on more risk with their particular client base, just given the, you know, market conditions. And then I also spoke with Aston Pennsylvania basin, East Federal Credit Union, so their credit union obviously so they have, you know, their membership base, they did have to do some changes to their LTVs or loan to value ratios and their debt to income ratio structures. And they also moved away from a set LTV and move to a tear based LTV based on the borrower’s credit score. And they also did have to increase their debt to income maximum ratio a little bit to basically help offset some of the the risk you know that they’re having to take on so we’re definitely seeing subprime As you know, lenders adjust and, and kind of, you know, have to make some of these changes and decisions just based on delinquencies going up, net charges going up. And the entire subprime market, you know, being a little bit more challenging. So it’s affecting the lender side as well. And I’m sure we’ll see other smaller subprime lenders making adjustments, as well, as you know, everyone in the space on the prime side, you know, I’m sure we’re gonna see adjustments as well, because prime losses are also going up and delinquencies are going up just not nearly at the rate we’re seeing on the subprime side. So it’d be, you know, we’re gonna see this more often, I think, on the subprime side here in the near term. Riley Wolfbauer 5:38 Great. Well, thanks, Amanda. That about does it for today’s episode. Thanks for joining us on the roadmap and be sure to follow us on acts formerly known as Twitter and LinkedIn. We will see you online at Auto Finance News dotnet and here next time