DOJ Initiates Subprime Auto Loan Inquiry Against GM Financial
GM Financial has informed that the U. S. Department of Justice has asked the company to provide details of subprime automobile loans. The vehicle finance unit of the largest US automaker has received orders to share the details of subprime auto loans provided by the firm since 2007.
The company has been served the subpoena regarding an investigation into possible violations of the civil fraud law FIRREA. FIRREA, the Financial Institutions Reform, Recovery and Enforcement Act inquiry into the GM Financial’s auto loan criteria could lead to further inquiries regarding the practices used by other lenders.
As per data released by Experian Automotive, the new automobile loans to borrowers with lowest credit score have increased by 51 percent during Q12014 compared to Q12013. During the same period, the automobile loans to consumers with highest credit score declined by 7 percent.
GM is already facing the heat for slow handling of correcting the potentially fatal defect in millions of cars. The company is facing the inquiry from Department of Justice.
In December 2013, Ally Financial agreed to pay $98 million in fine to settle the inquiry from DOJ. In 2010, General Motors acquired Texas-based AmeriCredit Inc. to provide in-house credit facility to consumers to improve car sales. The company was later rebranded as GM Financial.
Meanwhile, Chrysler and Ford have clarified that the auto majors have not received any inquiry or subpoena from DOJ.
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