August 24, 2014

Justice investigates subprime auto lending

Aug. 6, 2014 – The Justice Department is looking into subprime auto lending and the concerns that checks and standards are not being observed in a potential repeat of the subprime mortgage crisis, according to The New York Times.

In a securities filing this week, a General Motors subsidiary disclosed that it had been subpoenaed by the Justice Department for seven years of documents on subprime loan contract origination and securitization. The Times also said the U.S. attorney for the Southern District of New York is investigating companies for similar issues.

The Times said U.S. prosecutors are looking into potential violations of the Financial Institutions Reform, Recovery, and Enforcement Act, or Firrea, which has been used in the investigations into the subprime mortgage crisis. The paper cited credit rating firm Experian as saying the volume of total subprime auto loans at the beginning of 2014 was 15 percent higher than the previous year at $145.6 billion.