There is developing litigation risk with regard to indirect auto lending programs. NAFCU is aware of a few credit unions that have been sued by plaintiffs’ attorneys claiming indirect lending mark up is not properly disclosed to borrowers and violates state unfair and deceptive acts or practices (UDAP) laws and key principles of contract law. In some indirect auto lending relationships, auto dealers can increase the interest rate on car loans higher than what the borrower otherwise qualifies for and keep some or perhaps all of the difference.
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