WASHINGTON--A financial regulator is some concerns over what he believes are lax car loan standards that are in turn leading to losses for banks approving those loans.
Darrin Benhart, deputy comptroller for supervision risk management at the OCC, cited loan-performance data from Experian that shows a spike in the average size of car loans that banks and other lenders are writing off as a loss following months of unpaid bills by borrowers. In remarks to a collections-industry conference, Benhart said the data show the average charge-off for a car loan was $7,618 in Q4 2013, a 12% increase from one year earlier. Overall, for the entire car-loan industry, the average charge-off was $8,520, an increase of 17% from a year prior, according to the Experian data.
Benhart said he is also concerned over what he called the growing trend of car loans exceeding the value of the car. He said that trend is due, in part, to warranties and car accessories that are increasingly financed as part of the car loan.
Benhart also pointed to other, more recent data showing the situation isn’t likely to get better anytime soon, saying the Experian numbers show banks, credit unions and certain nonbank lenders during Q2 2014 reported increases compared with the year prior in car loans on which borrowers hadn’t made payments in 60 days. The Experian data shows the total balance of those delinquent loans at a bit more than $4 billion in Q2, up 27% from one year earlier. Overall, total outstanding car loans at national banks and thrifts increased 13% in 2013 and grew 5% during the first half of this year, according to Benhart.