Community Investment Act changes aimed at low-income borrowers could affect auto lending

Winslow said there are significant differences between auto lending and mortgage lending.

“The fact is that auto loans are actually much more like consumer loans than they are like mortgage loans,” Winslow said. “Under mortgages, banks are required to get information on a borrower’s race or ethnicity. In the auto lending context, banks are prohibited from gathering that.”

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

“The agencies can’t write a rule that somehow magically gets [low- and moderate-income] borrowers into more cars. The process just doesn’t work in the same way,” Eisner said. “The CRA is intended to have banks open up branches in communities that are under-banked or not banked and then build up those banking relationships. But the same thing doesn’t work in the auto context because the bank can’t open a dealership in an area and the bank can’t control who goes into what dealership.”

As banks prepare for the potential changes, Eisner suggested they examine their lending patterns.

Banks need to assess “where they’re lending and the economic makeup of their communities where they’re lending and start to ensure that they are providing not only loans but also investments and services,” Eisner said.

Winslow said she believes auto lending can be incorporated into the CRA, under different conditions. “When the agencies are talking about lumping all consumer loans together under retail services and products, that’s where the auto loans should be placed, as opposed to in their own category,” Winslow said.

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