CFPB – Repossession in 2022 Surpassed Pre-Pandemic Levels
The Consumer Financial Protection Bureau (CFPB) recently released a report revealing that auto repossessions at the end of 2022 surpassed pre-pandemic levels, reflecting growing financial strain in the $1.64 trillion auto loan market. The analysis, which examined data from nine major auto lenders covering accounts from 2018 to 2022, underscores the challenges faced by consumers amid rising vehicle costs, higher interest rates, and supply chain disruptions.
- Increase in Repossessions
In December 2022, 0.75% of all vehicle loans were assigned to repossession, marking a 22.5% increase compared to December 2019’s 0.61%. This indicates that the volume of vehicles eligible for repossession has now exceeded pre-pandemic levels. - Growing Use of Forwarding Companies
The report noted a significant rise in the use of third-party repossession forwarding companies by lenders, jumping from 31% in January 2018 to 66% in December 2022. These companies, referred to as forwarders, coordinate the repossession process but often lead to higher costs for consumers. The CFPB highlighted that the “average repossession costs charged to consumers were higher when a forwarder was involved.” - Residual Debt Post-Repossession
Repossession often leaves borrowers with more than just the loss of their vehicle. After a repossessed car is sold by the lender, consumers may still owe a substantial balance. In December 2019, the average outstanding balance for such accounts was over $10,000. By December 2022, this figure had risen sharply to over $11,000, reflecting the mounting financial burden on borrowers.
Auto loans are one of the largest sources of consumer credit in the U.S., second only to mortgages. As of April 2024, there were more than 100 million active auto finance accounts and $63 billion in new monthly originations. With vehicles often serving as a critical means of transportation for work and daily life, repossession can have devastating consequences. Borrowers not only lose access to their vehicles but also face ongoing liabilities, including unpaid loan balances and repossession fees. Additionally, these events can severely damage credit scores, making it harder for individuals to secure future financing.
CFPB Director Rohit Chopra explained that rising interest rates and supply chain challenges have increased the cost of purchasing and financing vehicles. “Supply chain shocks and higher interest rates drove up costs to purchase and finance a car,” Chopra said, emphasizing the importance of supporting borrowers to avoid the costly fallout of repossessions.
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