Two leading industry trade groups have disputed a recent New York Times editorial entitled “When a Car Loan Means Bankruptcy,” which attempted to draw parallels between subprime auto loans and subprime mortgage loans. The editorial concluded with a call to the CFPB and FTC “to move swiftly and aggressively” on subprime auto lending.
In a rebuttal to the editorial, Peter Welch, the president of the National Auto Dealers Association labeled the editorial “an unfair and unfounded attempt to portray the auto lending industry as a hotbed of deceptive practices and a harbinger of insolvency that could lead to another recession.” Mr. Welch indicated that “[n]othing could be further from the truth. Auto loan defaults are at historic lows (less than 1 percent in June).” He commented that “[e]nforcement of existing laws against a small minority of bad players is in everyone’s interest, but smearing an entire industry for the misdeeds of a few is just plain wrong.”
A representative of the American Financial Services Association was reported to have also called the editorial off base and noted that unlike investors who bought subprime mortgages expecting the underlying assets to appreciate, there is no similar expectation for auto loans.