The actions of federal regulators would suggest car buyers read the fine print before signing off on an auto loan. The Wall Street Journal reported that the Consumer Financial Protection Bureau is issuing a flurry of subpoenas in order to scrutinize the practices taking place in car dealerships. While loans and add-ons are technically legal, the way the figures were disclosed may have been anything but.
NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!The U.S. Department of Justice is continuing its watchdog efforts already applied to credit cards and other industries under the consumer-friendly Dodd-Frank legislation of 2010. Regulators will examine the paperwork from dealerships handing out loans to buyers with poor credit scores to make sure the unfavorable terms weren?t obscured when closing a deal. That could mean further regulatory blues for companies such as?JPMorgan (NYSE:JPM),?currently caught in the crosshairs of eight different probes.
While automaker giants Ford?(NYSE:F)?and?Toyota?(NYSE:TM)?watch sales rise in a revived industry, many observers are wondering if the crunch on lenders will mean a slowdown for new car sales. Regulators could fine these car companies for their part in the process. When a customer defaults on a loan, it?s the automobile equivalent of foreclosure: repossession. At a time when more than 70 percent of new car buyers use financing, limitations on the industry could have a major impact?
Though it is unclear how many loans would be denied after changes to lending practices, regulators hope to put consumers in a better position to escape car dealerships unscathed. Regulators noted that countless add-ons ? including identity theft protection and credit score monitoring ? have free trials and then lapse into paid subscriptions when the consumer least expects it.
NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!These charges smack of the same questionable tactics allegedly engaged in by?U.S. Bank?(NYSE:USB) and?Wells Fargo?(NYSE:WFC). The U.S. Office of the Comptroller of the Currency recently targeted the two banks for their participation in short-term loans labeled ?debt traps? by the CFPB. While it is an old tactic used to target vulnerable consumers, it may appear that the Justice Department has decided the time is up for such practices.
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Source: http://wallstcheatsheet.com/stocks/is-something-fishy-going-on-with-your-car-loan.html/
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