Car loans were excluded from the CARES Act and people are suffering

  • The number of complaints related to car loans with the Consumer Financial Protection Bureau (CFPB) was higher in the five months from March to July than in any other five-month period.
  • Among automaker-affiliated lenders, General Motors received the most complaints, followed by Toyota, Hyundai, Nissan and Honda.
  • Public interest group US PIRG Education Fund said government intervention at all levels is needed to protect consumers, but it is highly unlikely to happen before the election.

    The Trump administration has highlighted how the bipartisan CARES Act, which passed in March, has helped average Americans. From Economic Impact Payments to the Paycheck Protection Program, there was an undeniable push earlier this year to help the millions affected by the coronavirus. But dig a little deeper into the details and you’ll soon see how the CARES Act hasn’t covered every aspect of the financial damage the COVID-19 pandemic has caused to the economy.

    Concrete example: car loans. Certain types of loans have been affected by the CARES Act, including forbearance from federally guaranteed loans for some multifamily rental property owners and mortgages, as well as a temporary suspension of federal student loans. But car loans were not protected in any way. This meant that anyone with a car loan who missed some payments in the past six months could have had an impact on their credit rating.

    As the U.S. House Financial Services Committee stated in early April, “The CARES Act suspends negative credit reports only for eligible federal student loan repayments, but not for any other loan obligations.” . Individual auto lenders may have offered some COVID-related relief, but nothing in the CARES Act requires them to do so.

    Sharp increase in complaints about loans

    Given all of this, it’s no surprise that auto loan debt problems are exploding. A new report from the US Public Interest Research Group (PIRG) Education Fund has found there has been a ‘sharp increase’ in complaints to the Consumer Financial Protection Bureau (CFPB). ) regarding the purchase, lease and financing of automobiles since the start of the pandemic. Accurate numbers from the CFPB’s complaints database show that more than 2,800 auto loan and lease complaints were filed between March and July 2020. That’s more than in any other five-month period in the history of the database, US PIRG said.

    Since the beginning of March, more than one in five complaints about auto loans or leases mention COVID-19. These complaints related to a number of issues, including denial of auto loan repayment relief, changing loan terms, billing issues and harassing behavior by debt collectors.

    Complaints about car loans have been pouring into the CFPB for years. Ed Mierzwinski, senior director of the U.S. PIRG’s Federal Consumer Program, said Car and driver that when you look at the number of complaints per company relating to “loan or hire vehicles” between April 2017 and July 2020 – which is essentially the period covering all available complaints since the CFPB reorganized the complaints in the database data in April 2017 – you can see that lenders including Santander and Ally Financial received the most complaints (2,347 and 1,437, respectively). But the automakers’ financial arms have also received reports from disgruntled customers. General Motors Financial Company received 938 complaints, followed by Toyota Motor Credit Corporation (742), Hyundai Capital (677), Nissan Motor Acceptance Corporation (515) and American Honda Finance Corporation (453).

    Of course, it’s not just the pandemic that’s affecting auto loans. People are taking out bigger loans for longer terms as the average price of new cars continues to rise, trends that began well before 2020. Marketwatch notes that about a third of U.S. borrowers, or more than 100 million of Americans, owe money on a vehicle.

    Emergency government aid not on the horizon

    The US PIRG Education Fund recommends that states, localities and the federal government “continue and strengthen emergency programs throughout the duration of the pandemic, such as ensuring access to loan relief programs and prohibiting the collection of receivables, vehicle seizures and negative credit reports”. as a means of protecting consumers in the automotive market.

    This is unlikely to happen as the chances that a relief package could be passed before the Nov. 3 election dwindle, according to Treasury Secretary Steven Mnuchin in the Washington Post. “I would say at this point it would be difficult to do something before the election and execute it, given where we are,” he said Wednesday.

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