GM Receives DOJ Subpoena on Subprime Loan Practices
The Department of Justice has subpoenaed General Motors requesting documents detailing the company’s origination and securitization of subprime loan contracts dating back to 2007.
GM Financial, the parent company of GM, confirmed it received the subpoena July 28, according to several media outlets including the New York Times.
The Department of Justice sought information on GM’s underwriting criteria for a civil investigation into whether the company violated the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 by failing to fully disclose to investors borrowers’ credit worthiness for certain loans.
“Our understanding is that the request is focused on the subprime finance space in general,” Susan Sheffield, an executive vice president at GM Financial, told the New York Times Monday.
GM said it will provide the requested documents.
In collaboration with the Consumer Financial Protection Bureau, the DOJ said they have ramped up efforts to address discriminatory auto lending practices.
In December 2013, both agencies announced the federal government’s largest auto loan discrimination settlement in history to resolve claims that Detroit-based Ally Financial Inc. and Ally Bank engaged in an ongoing nationwide pattern or practice of discrimination against African-American, Hispanic and Asian and Pacific Islander borrowers in their auto lending since April 1, 2011.
Ally agreed to pay $80 million in compensation for victims of past discrimination and $18 million to the CFPB’s Civil Penalty Fund. Ally also must refund discriminatory overcharges to borrowers for the next three years unless it significantly reduces disparities in unjustified interest rate markups.