Regulations Targeting Auto Lending May Ultimately Increase Litigation Related To Securitizations

A rise in subprime auto lending has captured the attention of regulators, including the Consumer Financial Protection Bureau (CFPB), which in 2015 adopted a new rule bringing certain nonbank auto lenders under the agency's supervisory powers. In addition, the attorneys general of several states have begun to scrutinize sale transactions involving subprime auto lending and marketing efforts directed at consumers. For example, in 2015, the New York Attorney General reached a settlement with 25 auto dealerships across New York State resolving allegations of deceptive marketing and violations of credit laws by auto lenders (to read a previous D&G Alert on the subject, click here).

Prior to 2008, easy credit, defaults on mortgage loans, and declines in home values contributed to reductions in the value of securitized pools of mortgage loans, eventually leading to a halt in securitization activity and, more recently, significant and costly litigation. Today, the increased