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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.

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TransUnion: Auto Loan Growth Driven by Millennial Originations


CHICAGO — The millennial generation is the fastest-growing segment of auto loan consumers, according to TransUnion’s latest auto report. Millennials — consumers born in 1981 or after — represented 27% of total auto loan originations in 2014, up from 16% of total originations in 2009.

Millennials’ total outstanding auto balances have increased 23% in the past year, the highest of any age group. Average opening loan balances for this generation grew 4.1% year over year, up from $17,942 in 2013 to $18,678 in 2014.

“The growth in millennials’ auto loan originations dispels the common myth that millennials are not buying cars,” said Jason Laky, senior vice president and automotive business leader for TransUnion. “The growing average loan balances for millennials, combined with stable delinquency rates, indicate that we are still in the midst of a strong auto lending environment.”

At the end of 2014, auto loan delinquency rates remained relatively flat, with the 60-day auto loan delinquency rate moving from 1.14% in Q4 2013 to 1.16% in Q4 2014. The account-level and consumer-level delinquency rates were unchanged from the prior quarter. Auto loan debt per borrower rose to $17,453 in Q4 2014, marking the 15th straight quarter of increases.

Auto loan delinquency rates increased in 27 states on a year-over-year basis, with the largest moves coming in Arkansas (up 15.7%) and Nebraska (up 10.5%). The largest declines occurred in Oklahoma (down 18.6%) and Alaska (down 16.1%).

Auto loan debt per borrower rose 4.1% from $16,771 in Q4 2013 to $17,453 in Q4 2014. On a quarterly basis, auto loan debt increased from $17,352 in Q3 2014. Auto loan balances rose in every state between Q4 2013 and Q4 2014. States experiencing the largest increases in auto loan debt included New Mexico (up 6.7%), Texas (up 5.8%) and Georgia (up 5.5%).

TransUnion recorded 64.8 million auto loan accounts as of Q4 2014, up from 60.5 million in Q4 2013. Viewed one quarter in arrears (to ensure all accounts are included in the data), new account originations increased to 7 million in Q3 2014, up 5.1% from Q3 2013. Of the new auto trades, approximately 1 million were concentrated within the subprime tier (those consumers with a VantageScore 3.0 credit score lower than 601), essentially flat from Q3 2013. Prime or higher tiers (those consumers with a VantageScore 3.0 credit score higher than 660) represented 64% of new auto trades, also flat relative to Q3 2013. The subprime delinquency rate increased from 5.72% in Q4 2013 to 5.92% in Q4 2014.

“Access to credit is expanding for American consumers, especially in the non-prime and subprime risk tiers” said Laky. “Lenders are apparently taking advantage of a strong economy and robust auto market to find profitable lending opportunities beyond the limits of traditionally low-risk credit tiers. And given the fact that delinquency levels remain near historic lows, that strategy appears well justified.”

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Auto Loan Debt Reaches Three-Year Mark, Delinquencies Remain Low


CHICAGO, IL — Auto loan debt per borrower has now increased for three consecutive years, according to the latest TransUnion auto loan report. Auto loan debt per borrower has risen nearly 13% — or more than $1,900 — since this trend began in the first quarter 2011.

Auto loan debt per borrower jumped 4.1% from $16,191 in the first quarter 2013 to $16,862 in the first quarter 2014. On a quarterly basis, auto loan debt increased from $16,769 in fourth quarter 2013.

The 60-day delinquency rate increased 1% in the first quarter 2014 from a year ago. However, auto loan delinquencies dropped sharply on a quarterly basis from 1.14% in fourth quarter 2013. The delinquency rate remains below the first quarter average of 1.10% observed between 2008 and 2014.

The data provided was gathered from TransUnion’s proprietary Industry Insights Report (IIR), a quarterly overview summarizing data, trends and perspectives on the U.S. consumer lending industry. The report is based on anonymized credit data from virtually every credit-active consumer in the United States.

“The continued increase in auto loan debt is a healthy sign that auto sales and the auto loan market continue to perform well,” said Pete Turek, vice president of automotive in TransUnion’s financial services business unit. “It’s also encouraging to see auto loan delinquency rates remain at low levels; the 14-basis point drop this last quarter is especially encouraging.”

TransUnion recorded 70 million auto loan accounts as of the first quarter 2014, up from 57.4 million in first quarter 2013. Viewed one quarter in arrears (to ensure all accounts are included in the data), new account originations increased to 5.69 million in fourth quarter 2013 from 5.29 million in fourth quarter 2012. “The fact that there are nearly 13 million more auto loan accounts than just one year ago points to strong demand for credit and the wide availability of credit in the marketplace,” Turek added.

The subprime delinquency rate (those consumers with a VantageScore 2.0 credit score of less than 641 on a scale of 501-990) increased from 5.11% in first quarter 2013 to 5.52% in first quarter 2014. The share of nonprime originations (those consumers with a VantageScore 2.0 credit score of less than 700) grew by 34 basis points to 31.96% in the fourth quarter 2013, which was still lower than what was observed at the beginning of the recession (37.34% in fourth quarter 2007).

“Auto loans to the subprime population are growing as are delinquency rates for that group, but as an industry, the level of risk is well managed,” Turek said.

Eleven states experienced a decline in their auto loan delinquency rates between the first quarter 2013 and the first quarter 2014. The largest delinquency declines occurred in Oregon, Hawaii and California. The largest increases occurred in Michigan, Arkansas and Alaska. Auto loan balances rose in every state between the first quarter 2013 and the first quarter 2014.

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Auto Loan Delinquency Hits Lowest Levels Since 1999


CHICAGO, Il. – For the second consecutive quarter, the national auto loan delinquency rate (the ratio of borrowers 60 or more days past due) hit its lowest level since TransUnion began tracking the data in 1999. Auto loan delinquency rates in Q2 2012 dropped to 0.33%, down from 0.36% Q1 2012. On a year-over-year basis, auto loan delinquencies declined 25% from 0.44% in Q2 2011.

“It’s not surprising that auto loan delinquencies remain at record low levels,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit. “A recent TransUnion study found that consumers now value their auto loans more than their credit cards and mortgages. This is partly due to the need for transportation to get to work or to seek employment in a difficult job market. Additionally, consumers with car loans have more equity in their vehicle than they have in the recent past because of the strong used car vehicle market. Consumers want to keep their auto loan relationships in good standing.”

In addition to increased demand in new and used autos, bank auto debt per borrower has risen nearly 6% from $12,689 in Q2 2011 to $13,427 in Q2 2012. Despite growing bank auto debt, the majority of states and cities are experiencing declines in their auto loan delinquency rates.

Between Q1 2012 and Q2 2012, 37 states experienced declines in their auto delinquency rates. On a more granular level, 58% of metropolitan areas saw decreases in their auto delinquency rates in Q2 2012. This is down from the prior period where 66% of MSAs experienced decreases.

“It’s impressive to see auto loan delinquencies remain so low despite a growing proportion of new loans going to non-prime consumers,” added Turek.

In Q2 2012 on a year-over-year basis, the percentage of new auto loans to non-prime borrowers (with a VantageScore credit score lower than 700 on a scale of 501-990) increased by 9%. In the last two years (between Q2 2010 and Q2 2012), the percentage of new auto loans to non-prime borrowers has increased more than 20%.

“With the increase in non-prime borrowing, we do anticipate that auto loan delinquencies will begin to increase,” said Turek. “We are at such a low auto loan delinquency level – far from normal standards – that a slight rise through the end of the year should be expected, though the overall rate will likely remain relatively low.”

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TransUnion Expects Delinquencies to Remain Low in 2012


CHICAGO — TransUnion said this week that the ratio of auto loan borrowers 60 or more days past due will remain the same between now and 2012. The credit reporting agency also predicts that the 60-day delinquency rate will remain unchanged at the end of 2012, and predicted that it will decrease in the first two quarters of 2012 before rising back to 0.51 percent.

Auto loan delinquencies have made a significant decline since peaking during the recession at 0.86 percent in the fourth quarter of 2008, according to TransUnion. Since that time, the rate has dropped to 0.81 percent in 2009 0.59 percent in 2010, and is now expected be at 0.51percent by the end of this year, reported F&I and Showroom magazine.

“Auto loans have performed quite well since the beginning of 2010 and we expect delinquencies to remain relatively low throughout 2012 as the gradual recovery in the economy will benefit both lenders and consumers,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit. “With auto loan originations increasing dramatically in the last few years, one cause for concern is that any dramatic economic pressures — like we experienced during the last recession — could elevate delinquency levels since missed payments often occur early on in the life of the loan.”

Turek also noted that auto loan originations have greatly increased since the end of the recession, jumping nearly 28 percent as of the second quarter of 2011. Quarterly originations are nearly 41 percent higher than the lowest levels observed during the recession in the fourth quarter of 2008, and have risen approximately 8.4 percent in the last year.

Twenty-one states are expected to see delinquencies drop by the end of 2012, while 29 states should experience increases, according to TransUnion. The largest yearly percentage auto delinquency declines are expected in Michigan (-14.54 percent), Rhode Island (-14.22 percent) and North Carolina (-14.54 percent). The largest percentage increases are expected in North Dakota (72.47 percent), Alaska (25.43 percent) and Iowa (21.06 percent). Despite the large percentage increase in North Dakota’s auto delinquency rate, the state is still expected to have the lowest level in the nation at 0.16 percent.

60-Day Auto Loan Delinquency Projections for 2012

2010-2012    Q4 2010   Q4 2011    Q4 2012             

USA

0.59 percent

0.51 percent

0.51 percent

 

Highest Auto Loan Delinquency States         Q4 2012

Mississippi

0.87 percent

Louisiana

0.87 percent

Tennessee

0.80 percent

 

Lowest Auto Loan Delinquency States          Q4 2012

North Dakota

0.16 percent

Minnesota

0.24 percent

Michigan/Montana

0.28 percent

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Auto Loan Delinquencies Fall for Eighth Consecutive Quarter


CHICAGO — The national auto delinquency rate did fall for the eight consecutive quarter on a year-over-year basis, but it did show a modest increase from the second quarter, Transunion reported today.

The delinquency rate dropped from 0.58 percent in the year-ago quarter to 0.47 percent in the third quarter, but it did rise from 0.44 percent in the second quarter. The credit reporting agency said it expected the slight quarterly increase, but it did note that the rate continues to show a moderate deceleration on a year-over-year basis since the third quarter of 2010, reported F&I and Showroom magazine.

“Third quarter rates have consistently been greater than second quarter rates since 2000 — primarily due to seasonal influences,” said Peter Turek, automotive vice president in TransUnion’s financial services business unit. “The number of new auto loans coming on the books has continued trending upward since the end of the recession. A primary driver of this is relaxed lending policies of creditors. However, on a year-over-year basis, delinquencies have now dropped for eight consecutive quarters, even in the face of increased lending to the subprime market.”

Between the second and third quarters of 2011, 15 states experienced decreases in their auto delinquency rates. On a more granular level, 54 percent of metropolitan statistical areas (MSA) realized increases in their delinquency rates last quarter. During the second quarter of 2011, 40 percent of MSAs experienced a rise in auto delinquency rates compared to only 36 percent in the first quarter of this year.

“The good news is that national auto delinquency rates are still at historic lows and should remain so this year as the demand forecast for new and used vehicles indicates continued growth,” added Turek. “Barring any substantial changes in the macroeconomic environment, we see auto delinquency rates early next year remaining near current record lows. However, there is some upward pressure building on delinquency rates as long periods of high unemployment and low consumer sentiment take their toll on consumers.”

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