What is subprime lending?
Subprime lending is a term used for borrowers who do not meet the normal credit rating and therefore have higher rates and more difficulty getting loans. Things that can affect credit scores include bankruptcy, late or defaulted loans and credit, overextension of credit, tax liens, foreclosures.
While there is no specific number that all banks go by, a FICO score under 620 is often seen as subprime. The appeal of subprime loans for consumers who have faced financial difficulty is the ability to gain access to a loans for a home, vehicle or other goods. Consumers whose credit is considered sub-prime however are faced with higher rates, lower quality vehicles, and ultimately end up overpaying due to being deemed “higher risk”. Financial institutes and buy here /pay here business are banking on consumers continued need for credit.
Benefit or liability?
According to an article in Automotive News from 2014 record loans have been issued to subprime borrowers.With record numbers of such borrowers it is no surprise there are numerous lawsuits dealing with banks that finance such loans. High rates deemed predatory, failure to follow state repossession laws, questionable quality of vehicles being sold under subprime loans and even concerns from the FTC regarding installation of so called ACMS devices used to both turn off and track consumers who default on loans have brought many borrowers and banks to court.
Ultimately, the question remains, whether the benefit of subprime lending to enable high risk borrowers access to goods is beneficial enough to offset the many issues facing such borrowers.
Consumer Help
If you believe that you have been taken advantage of due to the purchase of a vehicle there are some steps you can take to try to get resolved on your own.
The Better Business Bureau– The BBB is a neutral third party organization that assists in resolving consumer disputes through negotiation and informal mediation. Consumers can also access information on approximately 5.2 million businesses for free. Consumers who wish to resolve the issue on their own can file a complaint with the Better Business if they believe they have been a victim of marketplace issues related to services or products. This includes auto fraud matters. Once a complaint is filed online ,the BBB will reach out to the business involved within 2 days, request a response within 14 days and attempt to resolve the matter. The business is under no obligation to respond however. Cases with the BBB are typically closed out within 30 days by either voluntarily resolving the dispute, by business denying the consumers complaint or by the business ignoring the request from the BBB. Consumers can access the online complaint form and additional information at http://www.bbb.org.
The Motor Vehicle Administration– The Office of Investigations & Internal Affairs investigates complaints against dealers, manufacturers and distributors of motor vehicles. The MVA covers a limited range related to the SALE of vehicles in MD by a licensed auto dealer. Issues related to warranties, repairs and repossessions are handled by various other agencies. Consumers can find additional information and submit an online complaint form at:
http://www.mva.maryland.gov/businesses/investigations/complaints-and-investigations.htm
Md Attorney General- Consumer Protection Division- The Consumer Protection Division also works to mediate claims related to the auto fraud and other such issues. Complaints submitted to the Attorney General do become public record. You can file a complaint here:
http://www.marylandattorneygeneral.gov/Pages/CPD/Complaint.aspx
Keep in mind cooperation thru any of the above resources are optional by the dealership or business.
Should you need further assistance or resolution is not possible, feel free to contact our office to discuss your options. We offer a FREE Consultation to review your case and determine whether you may have a cause of action.
CLARK LAW, LLC 