Tag Archive | "Equifax"

CFPB Orders TransUnion and Equifax to Pay $23.1 Million for Deceptive Practices

WASINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) this week took action against Equifax and TransUnion, ordering the two credit reporting agencies and their subsidiaries to pay more than $17.6 million in restitution for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers. The two firms were also ordered to pay $5.5 million in fines to the regulator.

TransUnion will provide more than $13.9 million in restition to affected consumers, while Equifax will pay nearly $3.9 million in restition. The bureau is also ordering the companies to now truthfully represent the usefulness of their credit scores, provide the true cost of obtaining those credit scores and other services, obtain the express informed consent of consumers for services, and provide an easy way to cancel products and services.

“TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises,” said CFPB Director Richard Cordray. “Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them.”

Chicago-based TransUnion and Atlanta-based Equifax are two of the nation’s three largest credit reporting agencies. The companies collect information like the borrower’s payment history, debt load, maximum credit limits, names and addresses of current creditors to generate credit reports and scores that are provided to businesses. Through their subsidiaries — TransUnion Interactive and Equifax Consumer Services — the companies also market, sell or provide credit-related products like credit scores, credit reports and credit monitoring directly to consumers.

Many lenders and other commercial users rely, in part, on these scores when deciding whether to extend credit to consumers, the bureau stated. Where the problem lies, however, is that TransUnion’s scores are based on a model from VantageScore Solutions LLC and Equifax’s scores are based on its own proprietary model — neither of which are typically used by lenders to make credit decisions.

The CFPB claims in its consent order that since at least July 2011, Equifax and TransUnion have been violating the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by deceiving consumers about the value of the credit scores they sold and deceiving consumers into enrolling in subscription programs.

The bureau also charged Equifax with violating the Fair Credit Reporting Act, which requires a credit reporting agency to provide a free credit report once every 12 months. And until January 2014, according to the bureau, consumers who got their report through Equifax first had to view Equifax advertisements. This, the bureau stated, is a violation of the FCRA, which prohibits such advertising until after the consumer receives their free report.

“Under the Dodd-Frank Act, the CFPB is authorized to take action against institutions engaged in unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws,” the statement from the CFPB read.

Posted in Auto Industry NewsComments Off on CFPB Orders TransUnion and Equifax to Pay $23.1 Million for Deceptive Practices

Auto Loan and Lease Balances Top $1 Trillion, Equifax Reports

ATLANTA — Equifax reported this week that the total amount of outstanding balances on automotive loans and leases has crossed the $1 trillion mark, with finance companies leading the way.

As of June 2015, total outstanding balances on auto loans and leases reached $1.021 trillion, a year-over-year increase of 10.5%. Additionally, the number of outstanding accounts has increased 8% from a year ago to 73.7 million.

“Strong sales numbers in both the new-car and used-car markets, coupled with the availability of quality financing for consumers are a few of the main reasons the industry has reached the one trillion-dollar mark,” said Dennis Carlson, deputy chief economist at Equifax. “It clearly reflects that the improving economy has provided the impetus for consumers to replace their aging vehicles and begin to satisfy their pent-up auto demand.”

While auto loan balances through June 2015 are growing at relatively similar rates for both banks and finance companies (10.1% and 10.2% year over year, respectively), the latter is considerably outpacing the former in auto leasing. According to Equifax, finance company lease portfolios are more than seven times the size of bank lease portfolios. Finance companies are also growing originations faster than banks, with 54.2% of all new auto accounts and 51.8% of dollar originations through April 2015 flowing through the segment.

“The captive auto finance companies are supporting sales for the manufacturers, and dealers continue to work with independent auto finance companies to find the right loans for their customers, particularly in the non-prime space,” Carlson noted. “This combination has led to finance companies growing slightly faster than the commercial bank segment.”

According to Equifax, more than nine million auto loans, totaling $182.9 billion, were originated through April 2015. This is a 5.8% increase in accounts and an 8% rise in balances compared to the same time last year. These are the highest levels for this time period since Equifax began tracking this data.

Additionally, 2.12 million auto loans to consumers with an Equifax Risk Score below 620, generally considered subprime accounts, were originated through April 2015, a 9.6% increase over last year. Additionally, loans made to customers with subprime credit accounted for 23.5% of all auto loans through April, up slightly from 22.7% one year ago.

The average loan amount, according to Equifax, was $20,800 through April, a 3.65% increase over April 2014. Additionally, the average amount financed for a subprime loan increased 3.74% to $18,200.

Posted in Auto Industry NewsComments Off on Auto Loan and Lease Balances Top $1 Trillion, Equifax Reports

Severe Delinquencies Fall to 10-Year Low, Equifax Reports

ATLANTA — According Equifax’s latest National Consumer Credit Trends Report, new auto loan originations have reached record highs, while severe delinquency rates fell to their lowest level in nearly a decade, reports F&I and Showroom. At the same time, auto leasing has surged as consumer demand for new vehicles remains strong.

The severe delinquency rate — the percentage of outstanding loans 60 or more days past due — for auto loans and leases in April 2015 was 0.81%, the lowest level since September 2005. This uptick in performance coincides with continued growth in the auto loan market, with the number of new auto loan originations through February reaching 4.1 million — a 5.2% increase over the same period last year. It’s also the highest origination total since Equifax began tracking this data in 2005.

“There’s been much concern about the growth of auto lending, particularly in the subprime space, over the past year, yet historically low delinquency rates reveal that the sector continues to perform well,” said Dennis Carlson, Deputy Chief Economist at Equifax. “More consumers are staying current on their payments, which is due to both improved economic conditions and the fact that lenders and dealers are qualifying the right borrowers across the entire credit spectrum.”

Other highlights from Equifax’s report include:

  • More than 980,000 auto loans have been originated year to date to consumers with an Equifax Risk Score below 620, an 8.1% increase over 2014. These newly issued loans have a corresponding total balance of $17 billion.
  • The average new auto loan amount issued in February 2015 was $20,310, a 4.2% increase over February 2014.
  • Through February, 24.2% of newly originated auto loans were issued to consumers with a subprime credit score, a slight increase in share compared to the same period last year.
  • The average subprime loan amount was $17,363 in February 2015, a 4.4% increase compared to February 2014.
  • Total auto loans and leases outstanding as of April 2015 was more than $1 trillion, with loans comprising $934 billion and leases making up $66 billion of that total.
  • Auto leasing has grown for both banks and finance companies. In April 2015, bank portfolios held 973,100 auto leases and finance companies held 6.63 million leases, a 12.1% and 19.1% year-over-year growth rate, respectively, in outstanding lease accounts.

Posted in Auto Industry NewsComments Off on Severe Delinquencies Fall to 10-Year Low, Equifax Reports

Equifax Refutes ‘Subprime Bubble’ in New Report

ATLANTA — Equifax Inc. has released its latest economic trends commentary, “Subprime Auto Loans: A Second Chance at Economic Opportunity,” which examines two groups of consumers with deep subprime credit scores over a three-year period: those who originated a subprime auto loan and those who did not.

Equifax found that over the three-year time period, those consumers with deep subprime credit scores that originated a subprime auto loan showed, in aggregate, a significant increase in their credit score. In fact, those consumers improved their credit score by a median of 52 points, which is a 62.5% improvement over the median score change of the group that did not take out a loan. Even more telling, those that took out a subprime auto loan were four times more likely than those who did not to have improved their score to a level above 640, moving them out of the subprime segment.

“The auto industry’s success wouldn’t be what it is today if it weren’t for the responsible, solid subprime loans made to the many Americans in need of a car to get to their jobs or take their children to school,” Chief Economist Amy Crews Cutts and Deputy Chief Economist Dennis Carlson said. “Lenders now have better tools, more data and enhanced technology available to them to make sounder and safer decisions. While we should all continue to remain vigilant, we can confidently say that subprime auto lending is currently performing well, it’s not growing as quickly as prime lending, and our data does not suggest that a bubble is forming.”

“I started my career sitting across the loan desk from thousands of nonprime families in need of a vehicle — each of them having a story about circumstances that resulted in their less than perfect credit score,” said Lou Loquasto, auto finance leader at Equifax. “It was rewarding to watch these customers diligently make the most of these second chances and see a high percentage graduate to a prime credit standing — empowering them to take full advantage of their newfound financial well-being.”

To read the full report, click here.

Posted in Auto Industry NewsComments Off on Equifax Refutes ‘Subprime Bubble’ in New Report

‘Great Deleveraging’ Has Ended, Equifax Reports

ATLANTA — Based on consumer credit data collect by Equifax through November, the five-year run of debt deleveraging might be over. The credit reporting agency reported this week that nonmortgage credit balances reached their highest level since the Great Recession in November, totaling $3.1 trilling. Showing the biggest increase were credit balances for auto loans.

Credit balances for auto loans increased 9.6% on a year-over-year basis to $965 billion. Credit balances for retail- and bank-issued credit cards also increased 4.8% and 4.7% to $71 billion and $611.7 billion, respectively.

November also saw the total balance of nonmortgage write-offs fall to their second lowest level in eight year on a year-to-date basis, totaling $73.4 billion. The total balance of home-finance write-offs also fell to their second-lowest level in eight years on a year-to-date basis, totaling $91.2 billion.

“The Great Deleveraging has clearly ended and U.S. consumers are back in the borrowing business, but how they borrow has greatly changed from prior to the Great Recession,” said Amy Crews Cutts, senior vice president and chief economist at Equifax. “Today, while auto loans make up 30.9% of nonmortgage consumer debt — just as they did in December 2007 at the recession’s start — student loans have grown from 20.2% to a whopping 37.3%, and bank- and retailer-issued credit cards are down to 21.9% of consumer debt from 31.4%.”

Equifax also reported that the total number of outstanding loans on a year-to-date basis in November was more than 70 million, the highest level in more than five years. Serious delinquencies, or auto loans 60 days or more past due, accounted for 1.04% of total balances — a decrease from 1.15% one year ago.

Additionally, the total number of new auto loans originated between January and September 2014 was 19.2 million, an increase of 4.7% from a year ago, according to Equifax. At the same time, the total balance of new credit originated was $391.6 billion, an increase of 7%.

“One way to read this change is that consumers now value investment (in their education and durable goods like cars) over immediate consumption, which is good for our economy over the long run,” Cutts noted. “But with the exception of new car production, sluggish consumption slows economic growth in the short-term, partially explaining the slower-than-hoped-for economic recovery.”

Posted in Auto Industry NewsComments Off on ‘Great Deleveraging’ Has Ended, Equifax Reports

No Subprime Bubble in Sight, Equifax Says

ATLANTA — While year-to-date auto loan growth rates have slowed compared to last year, totals for new credit and the number of new loans originated for auto purchases are at all-time highs, according to Equifax’s latest National Consumer Credit Trends Report.

Through June, the total number of new loans originated was 12.5 million, an increase of 4.9% from same time a year ago. The total balance of new loans was $254.2 billion, an increase of 6.9% from same time a year ago. The total also represents nearly half of total new non-mortgage credit originated.

“Auto sales continue to soar, crossing the 17.4 million mark on an annualized basis for new cars and light trucks in August,” said Amy Crews Cutts, senior vice president and chief economist at Equifax. “The abundance of high-quality vehicles for sale, the attractive financing options available, and the ever-increasing age of cars on the road today have created an environment that makes it easy for consumers to say ‘yes’ when it comes to purchasing a new or used car.

“Importantly, auto loan originations to borrowers with subprime credit scores remain stable, providing additional evidence that a bubble is not occurring in that space,” she added.

On that note, the total number of new loans originated year to date through June for subprime borrowers, defined as consumers with Equifax Risk Scores of 640 or lower, is 3.9 million, representing 31.2% of all auto loans originated this year. This is a slight decrease in share from this same time in 2013.

Similarly, the total balance of newly originated subprime auto loans was $70.7 billion, an eight-year high. The total also accounted for 27.8% of the total balance of new auto loans, a slight increase in share from the previous year. However, serious delinquencies represented 1.05% of total balances outstanding, a decrease of 8% from same time a year ago.

Year to date in June, the average loan amount for borrowers with risk scores of 680 or lower increased the most, showing a 3% increase from the previous year. Loan sizes among borrowers with risk scores of 760 or higher showed little change from the same time a year ago.

The report also showed that the total balance of auto loans outstanding in August was $924.2 billion, an all-time high and an increase of 10.8% from same time a year ago. The total number of auto loans outstanding stood at more than 65 million, a record high and an increase of more than 6% from the same time last year.

By source, balances on outstanding loans funded by banks, savings and loans and credit unions totaled $453 billion, while the total number of loans was more than 31.4 million. Similarly, total outstanding balances for loans funded by auto finance companies was $471.2 billion, while the total number of existing loans was 34.1 million.

Posted in Auto Industry NewsComments Off on No Subprime Bubble in Sight, Equifax Says