Did you see the clip of comedian John Oliver regarding subprime auto lending? If not, check it out here. While I commend satirists like John Oliver for expanding the public consciousness on key issues, I took ire with this subprime auto segment due to the broad brush with which he painted the industry.

We have explored the topic of Financial Health in previous blogs with a necessary focus on the unbanked and credit invisibles. The majority of people who fall into these categories are young, immigrant, or living in an underserved area (both rural and urban), and their financial support options are severely limited. Payday Loans and Buy-Here, Pay-Here (BHPH) Auto Lenders are two examples of non-traditional lenders that have emerged to fill this void. (Side-note:  A brief history of Payday Lending Law can be found here.)  However, in contrast to the unscrupulous lenders highlighted in John Oliver’s piece, most BHPH and other subprime lenders operate in a reputable manner and help serve a critically underserved demographic.

While the industry has largely self-regulated, regulatory oversight has been put in place to help further curb any such predatory lending practices. The examples in the aforementioned clip highlight why the UDAAP (Unfair, Deceptive, or Abusive Acts or Practices) standard was included in the Dodd-Frank Act. This guideline makes such practices illegal and therefore subject to enforcement, including fines and penalties. All reputable financial institutions require their employees to annually review and certify compliance with this standard.

Improving financial health via greater access to affordable financial services and products is a critical initiative for the industry. We’re proud to work with a number of lenders who are tackling this mission head-on. But as evidenced by the John Oliver clip, we still have a ways to go to dispel the negative impression that can hang over the subprime industry at large. Let’s work on this together. Click here to learn how LexisNexis® Risk Solutions alternative data and analytic services are empowering lenders to develop affordable lending and banking solutions for the unbanked and underserved markets.

(Let me know what you think of the clip by leaving a comment below.)

  1. If you’ve previously read this post, you will notice that I have reworked it a bit.

    My original post may have been a bit of a rant, as I had a knee-jerk reaction to the subprime industry being generalized in such a poor light. Especially given the evidence we’ve seen to the contrary — numerous lenders who are looking to create mutually beneficial lending relationships with underserved, unbanked and credit invisibles.

    This is a population that numbers more than 65 million in this country, and without lenders who are willing to innovate and look at them in an alternative light, the goal of improving financial health becomes further out of reach.

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