Subprime Lending News 7/21/17:
Citizens Bank simplifies student loans, NY attorney general looks into National Collegiate, and yet another take on the subprime auto lending crisis.
By Caroline Thompson
Plus, a look into the president’s banking relationships. Happy Friday, everyone.
Subprime lending in the auto industry may not be so dire (according to a car-industry economist).
We’ve reported a lot recently on what many in the financial industry are painting as a disaster waiting to happen: subprime auto loans are being doled out at an alarming rate, often without any oversight or regulation. This is certainly concerning, especially for customers who are talked into taking out loans for cars they can’t actually afford, but some economists are calling for an end to the doomsday theories.
In an opinion piece on The Hill, economist Jonathan Smoke wrote that Wall Street’s fear of the auto industry becoming the next housing crisis are unfounded. He says that although the subprime share has grown in recent years, there have been moves to tighten standards and regulations around it, which have returned the market to a “normal level of subprime lending.” This op-ed might come as a welcome relief for anyone worried about the state of the industry, but it should probably be taken with a grain of salt. Smoke is chief economist for Cox Automotive, whose portfolio of brands includes Autotrader, Dealer.com, vAuto, and others.
Citizens Bank makes it easier for students to re-apply for loans year to year.
Anyone who currently has student loans understands the hassle and stress that comes from having to re-apply year after year. “A big stress point for consumers was not knowing if they would get approved the next year for the amount they need,” said Christine Roberts, head of student lending for Citizens Bank. “They also didn’t like filing the same mountain of paperwork each year.” With these complaints in mind, the Providence, Rhode Island-based bank recently rolled out a multi-year loan approval program that will allow borrowers to apply for a loan before their first year of college, and be pre-approved until they graduate – even if it takes them more than four years. Every year, the bank will make what’s called a “soft” inquiry, which will not affect the borrower’s credit score, to make sure there have been no major changes to their credit that would prevent them from eventually paying back the loan.
New York attorney general Eric T. Schneiderman opens investigation into the National Collegiate Student Loan Trusts.
The attorney general of New York state is taking a close look into the collection practices of student loan giant National Collegiate. The loan company is one of the nation’s largest owners of costly private student debt, and it has recently come under fire for mishandling client documents and providing borrowers with inaccurate paperwork when trying to collect on their loans. The attorney general is vowing to investigate all claims of fraud against the company, saying in a statement to the New York Times that he “won’t allow a generation of New Yorkers to get victimized by the very system that was created to help them get ahead.”
Deutsche Bank faces scrutiny for loans to President Trump.
Donald Trump went through a rash of bankruptcies in his casino and hotel businesses in the 1990s, which left the then-real estate investor with few options for financing. According to the New York Times, Deutsche Bank was, at the time, “among the few major financial institutions willing to lend him money.” Now the bank is facing scrutiny from special counsel Robert Mueller, who is overseeing the federal investigation into the Trump campaign’s alleged ties to Russia. Over the past 20 years, Trump has taken out more than $4 billion in loans and potential bond offerings from Deutsche Bank, and his son-in-law, Jared Kushner, also has a longstanding relationship with the bank. To complicate the matter, Deutsche Bank recently was forced to pay $600 million in penalties after New York and British regulators caught it laundering money for various Russian entities.