Auto Loan Complaints Rise

Consumer complaints about auto lending and leasing have increased dramatically during the COVID-19 pandemic. 

• From March through July of 2020, consumers submitted more than 2,800 auto loan and lease complaints — more than any other five-month period in the history of the Consumer Complaint Database.
• Complaints about being denied auto loan payment relief surged to double pre-pandemic volumes.
• Since March 1, more than 1 in 5 auto loan and lease complaint narratives have mentioned the COVID-19 pandemic.

The Consumer Complaint Database reveals a pattern of scams and abusive practices by banks, captive finance companies, and subprime lenders.

• Deceptive add-ons. Dealers will often attempt to sell consumers expensive add-on products such as extended warranties, service plans and insurance products. Of complaints in the CFPB database related to add-on products, 29 percent include the term “warranty” and 39 percent include the term “insurance.”
• High-pressure or deceptive sales tactics. In complaint narratives, consumers describe feeling pressured into expensive loans and add-on products.
• Broken billing and payment systems. More than 1 in 5 auto loan and lease complaints are cataloged as having to do with a “billing problem,” and 42 percent of billing complaint narratives mention the term “late,” as many consumers describe broken billing systems causing late fees.
• Harassment over repossessions and debt collection. Consumers have submitted more than 5,000 complaints regarding debt collection for auto debt, nearly half (45 percent) of which involve harassing behavior by collectors.
• Yo-yo financing and changing loan terms. More than 280 complaints are about loan terms changing during or after closing — a common tactic used by dealers or lenders to get consumers to accept a higher interest rate than they’d initially been quoted. Some complaints describe “yo-yo financing,” in which a dealer tries to change loan terms after a consumer has already driven off in their vehicle.

Rising auto debt and the COVID-19 pandemic leave a growing share of Americans vulnerable to problems with car loans. 

• The amount of outstanding auto debt has risen more than 85 percent since the end of 2009, while the number of Americans holding auto debt reached a record high in early 2020.
• Even before the pandemic started, more than 5 percent of auto loans were at least 90 days delinquent.
• Longer loan terms and expensive add-on products leave more Americans owing more on their vehicles than they are worth — exacerbating their vulnerability to economic shocks such as the COVID-19 pandemic.
• The automobile-dependent design of America’s cities and transportation networks leave many Americans with little choice but to go into debt to own a car. The financial crisis facing transit agencies during COVID-19 could leave even more Americans financially vulnerable due to car dependence.