How the Community Investment Act Could Impact Auto Loans

Winslow said there are significant differences between auto loans and mortgages.

“The thing is, auto loans are much more like consumer loans than mortgages,” Winslow said. “In the context of mortgages, banks are required to obtain information about a borrower’s race or ethnicity. In the context of auto loans, banks are prohibited from collecting such information.”

Eisner said the ARC could not extend its reach to the automotive retail market because of fundamental differences.

“Agencies can’t write a rule that somehow becomes magic [low- and moderate-income] borrowers in more cars. The process just doesn’t work the same way,” Eisner said. “ARC aims for banks to open branches in communities that are under-banked or unbanked, and then grow those banking relationships. But the same thing doesn’t work in the automotive context because the bank can’t open a dealership in an area and the bank can’t control who goes to which dealership.”

As banks brace for potential changes, Eisner suggested they examine their lending habits.

Banks need to assess “where they lend and the economic makeup of their communities where they lend and start making sure they’re not just providing loans but also investments and services,” Eisner said.

Winslow said she believes car loans can be rolled into ARC, under different terms. “When agencies talk about grouping all consumer loans into retail services and products, that’s where auto loans should go, not their own category,” Winslow said.

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