While the federal government has outlawed most of the risky and deceptive mortgage lending practices that led to that financial crisis, it must now do the same with the auto lending industry, where the practice of luring people into loans that damage them financially is all too common, according to an editorial in Saturday’s New York Times. Predatory loans arranged by unscrupulous auto dealers have long been a source of hardship for low-income consumers who can least afford them, according to the editorial. But the problem has worsened since major banks entered the picture and began buying up car loans to package them in securities sold to pension funds, insurance companies and others. Banks that are scrambling to buy such loans have sometimes formed alliances with unscrupulous dealers, including one who was indicted on grand larceny charges that he defrauded two dozen buyers. Dealers who can offload loans to banks before the loans fail take the same rapacious approach that mortgage lenders took in the run-up to the recession. They prey on less sophisticated borrowers, falsifying the borrower’s income information and writing loans with astronomical interest rates and hidden fees that deliver a quick profit to the dealers.
