Fair lending

Today we announced how lenders can take steps to prevent discrimination in auto lending, but there are also steps that every consumer can take to make it more likely that they are getting a good deal on a car loan. If you’re shopping for a car loan, you’re not alone. The average loan for a new car is up to $26,691 – making auto loans an important decision for consumers.

Shop for a car loan before shopping for a car
When you decide to buy a car, there are several options when it comes to getting a loan. You can check with several banks, credit unions, or other lenders to get a pre-approved loan. Get that pre-approval before you go to buy a car and take the pre-approval with you when you go shopping. Having a loan offer in-hand when you shop for the car puts you in a strong position. For most people, concentrating your applications in a short period of time can minimize the effect on your credit score. Any negative effect will be small while the benefits of shopping around could be big.

When comparing loans, make sure you’re comparing all the terms
If you get competing offers from different lenders, including a dealer who offers you financing, you should take a close look at each of the loan terms, including the interest rate, amount financed, and length of the car loan. Some lenders may tell you they can tailor the monthly payments to suit your budget, but that could mean extending the lifetime of the loan. That could mean that you would still owe on the car when you are ready for your next car.

It’s hard for you to know how your interest rate and other loan terms stack up against other consumers in similar situations. Our announcement today is part our effort to protect consumers from unlawful discrimination. You can be a savvy buyer, though, by taking easy steps to negotiate the best deal for yourself – starting by shopping for a car loan before buying the car.

 

We are responsible for ensuring “fair, equitable, and nondiscriminatory access to credit” under the Dodd-Frank Act. Today, we submitted a report to Congress on our efforts to fulfill this fair lending mandate. The CFPB has made great strides on this front over the past year, and the Fair Lending Report of the Consumer Financial Protection Bureau describes our accomplishments.

Credit discrimination can result in some borrowers paying more than they should have to for credit—if they are able to get credit at all. In many cases, borrowers don’t know they are paying more for credit than their friends or neighbors are. Not only is this wrong, it’s against the law. And the CFPB is working to stop it.

Congress gave the CFPB authority over large banks, private student lenders, mortgage companies, and certain other businesses that offer credit. We make sure that these businesses comply with federal consumer financial laws, including the Equal Credit Opportunity Act (ECOA) and the Home Mortgage Disclosure Act (HMDA). ECOA protects consumers from credit discrimination. HMDA requires that some financial institutions collect and disclose certain information about home mortgage loan applications. This helps with identifying discrimination and enforcing the law.

Over the past year, the Office of Fair Lending, together with our colleagues in Supervision, has built a system to supervise lenders. We examine lenders to ensure that they comply with ECOA and HMDA. We’ve carried out fair lending reviews at financial institutions across the country. And together with our colleagues in Enforcement, we’ve worked on several fair lending investigations that may result in further action if we find that violations of the law occurred.

Currently, we are in the process of updating the rules that implement ECOA and HMDA. These new rules will help us carry out our fair lending mandate. We’re also talking with consumers and lenders. We help consumers understand their rights, and we make sure lenders know how to comply with the rules. Finally, Congress asked us to examine fair lending issues in specific areas of consumer finance, such as student lending. We presented our findings in July.

We’ve made a lot of progress, but there’s more to do. Moving forward, we will continue to supervise lenders to ensure fair lending compliance. As part of our continued commitment to transparency, we will share our fair lending expectations with financial institutions. We will work with financial institutions to ensure that our exams are carried out efficiently and effectively.

And we’ll continue to talk to consumers. An informed consumer is the first line of defense against discriminatory practices. We are proud to work for American consumers, and we do our job best when we hear from you directly. Tell us your story, and get answers to your financial questions.

Find out more about the Office of Fair Lending and Equal Opportunity. And if you think you’ve been discriminated against by a lender, submit a complaint.

The CFPB is the first federal agency with the primary mission of making consumer financial markets work for American consumers. Congress charged us with ensuring that:

• All consumers have access to markets for consumer financial products and services; and
• Markets for consumer financial products and services are fair, transparent, and competitive.

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