RSSThe rate of auto repossessions was higher at the end of 2022 than before the pandemic, according to a Consumer Financial Protection Bureau report.
As of December 2022, 0.75 percent of outstanding vehicle loans were assigned to repossession, up 22.5 percent from 0.61 percent in December 2019. Lenders’ use of third-party repossession forwarding companies grew to 66 percent in December 2022 from 31 percent in January 2018.
Lenders were allegedly more likely to use third parties to manage repossessions than before the pandemic. The use of third parties leads to higher costs for borrowers, according to the Jan. 21 report, which consisted of data from nine major auto lenders from 2018-22.
Consumers can still owe money on their vehicle even after it is repossessed and sold by the lender, according to the CFPB. The average outstanding balance for consumers who owed money after repossession was allegedly more than $11,000 as of 2022.
“Supply chain shocks and higher interest rates drove up costs to purchase and finance a car,” said CFPB Director Rohit Chopra. “With outstanding auto loans exceeding $1 trillion, it’s critical that borrowers can avoid the costly consequences of repossession.”
Considered one of the largest sources of consumer credit outside of mortgage lending, there were more than 100 million active auto finance accounts and $63 billion in new monthly originations as of last April, according to the bureau.
“When vehicles are repossessed, consumers often lose their primary transportation to work, may be required to repay outstanding balances plus repossession fees, and may see additional negative impacts to their credit score,” the CFPB added.
