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Consumer complaints to the Consumer Financial Protection Bureau (CFPB) regarding vehicle loans and leases have increased sharply during the coronavirus pandemic, according to a new report by the Arizona PIRG Education Fund and Frontier Group. The analysis suggests that consumers in Arizona and across the United States are facing abusive and deceptive practices from the automobile lending industry.
“The pandemic has caused auto loan complaints to spike,” said Diane E. Brown, Executive Director of the Arizona PIRG Education Fund. “While so many Americans have endured life-changing events in the past few months and have a lot less money, auto loan market abuses that have been growing since the 2008 financial collapse have dramatically worsened.”
The new report, Auto Loan Complaints Rise: Pandemic Worsens Existing Consumer Problems with Car Buying in CFPB data, found that from March through July 2020, the CFPB received 2,844 complaints about auto loans and leases – more than any other five-month period in the 8-year history of the Consumer Complaint Database. In particular, complaints related to auto loan payment relief skyrocketed. Nearly 300 consumers submitted complaints about their lenders denying requests to lower payments in March through July, more than double the volume from the same period in 2019.
The CFPB’s Consumer Complaint Database reveals a wide variety of ways that problems with loans and leases can damage consumers’ financial health. The complaints include:
● More than 5,200 dealing with auto debt collection, nearly half (45 percent) of which involve harassing behavior by collectors.
● More than 2,800 about problems with credit reports related to auto payments. More than two-thirds of such complaints allege incorrect information on credit reports.
"The CFPB data tell a clear story: Predatory auto loan practices and the stress of COVID-19 are driving consumers to the breaking point," added co-author Gideon Weissman, analyst with Frontier Group. "The narratives describe many of the auto lending tricks and traps that have harmed consumers for too long, and that now threaten to make Americans' already-bad financial situation worse."
Some of the key problems identified are:
● Deceptive add-ons. Dealers often pressure consumers into buying expensive add-on products such as extended warranties, service plans and insurance products.
● High pressure or deceptive sales tactics. In complaint narratives, consumers describe feeling pushed into expensive loans and add-on products.
● Broken billing and payment systems. Forty-two percent of billing complaint narratives mention the term “late,” with many consumers describing broken billing systems causing late fees.
The report makes recommendations to the CFPB, the Federal Trade Commission (FTC), and state and local policymakers to prevent auto loan and leasing abuses. The authors also note that transforming transportation across the United States and making it easier for people to get around without a car will reduce consumers’ exposure to the financial vulnerability that often accompanies vehicle ownership.
“Personal car ownership was once a symbol of freedom in the United States. Now, for too many Americans, owning a vehicle isn’t a choice, but an expensive necessity,” said Brown. “Increasing transportation options such as building more pedestrian- and bicycle-friendly infrastructure and improving the availability of public transit is an important step to help Arizonans reduce their exposure to auto debt.”
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