General Motors Co. must turn over documents related to its subprime auto-lending under a subpoena issued by the U.S. Justice Department, the Detroit auto maker disclosed in a regulatory filing Monday, reported The Wall Street Journal.
GM’s car-financing unit said it received the subpoena July 28 in connection with a federal investigation of subprime auto loans dating to 2007. The statement said the request was “in contemplation of a civil proceeding for potential violations of Financial Institutions Reform, Recovery, and Enforcement Act of 1989.”
In a statement Monday, GM Financial said “our understanding is that the request is focused on the subprime auto finance space in general. There are no allegations set forth in the subpoena and GMF is cooperating with the request.”
The subpoena is one more sign that federal regulators are turning up pressure on the auto finance industry. The Justice Department and the Consumer Financial Protection Bureau have been investigating whether lenders are discriminating against women and minorities. Ally Financial Inc., the former consumer credit unit of GM, agreed in December to pay $98 million to settle a probe of its lending practices by the Justice Department and the CFPB. Ally didn’t admit wrongdoing under the agreement.
The Justice Department is looking at “underwriting criteria used to originate these automobile loan contracts and the representations and warranties relating to those underwriting criteria that were made in connection with the securitization of the automobile loan contracts,” GM Financial said in a filing with the Securities and Exchange Commission.
GM’s filing was reported earlier by Bloomberg News.
The disclosure by GM Financial indicates regulators’ concerns are expanding to questions about the quality of subprime auto loans.
In June, the Office of the Comptroller of the Currency noted that the average amount of an auto loan was greater than the value of the car during the fourth quarter of 2013, as lenders bundled the costs of extended warranties, credit life insurance and dealer-installed accessories into contracts.
“The results have yet to show large-scale deterioration at the portfolio level, but signs of increasing risk are evident,” the regulator said in a report.
DriveTime Automotive Group Inc., which operates a chain of “buy-here, pay-here” auto dealerships, disclosed in a March regulatory filing that the Consumer Financial Protection Bureau had notified the company in January that the agency was
