General Motors just can't seem to avoid controversy in 2014. Of course, there has been a continual run of recalls throughout the year, and now, its GM Financial division is under investigation for possibly violating the Financial Institutions Reform, Recovery and Enforcement Act, according to Reuters. FIRREA gives the DoJ the power to examine and potentially sue companies that are found to be acting fraudulently. In this case, the feds want to know the division's criteria when securitizing subprime loans.

GM bought the company previously known as AmeriCredit in 2010 for $3.5 billion and renamed it GM Financial. It allowed the automaker to have an in-house division to offer finance and lease options through dealers, since it sold off GMAC, now Ally Financial. According to Reuters, GM Financial has issued $2.15 billion in subprime-auto-loan-backed securities in the first six months of the year.

Subprime auto loans have been on the upswing this year, despite the recent financial crisis. According to a recent study from credit reporting company Equifax looking at data as of April 2014, $46.2 billion in auto loans have been extended to subprime buyers. That's an eight-year high and about 28 percent of the auto loan balance.


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  • 13 Comments
      johnb
      • 4 Months Ago
      how else are they going to move product if they can't go subprime?
      philip_rico
      • 4 Months Ago
      As HRH The Queen might say, "2014 is GM's 'annus horribilis'".
      TruthHertz
      • 4 Months Ago
      They must not have been buying deep enough. I still know black folks without a Caddy...
        Edward
        • 4 Months Ago
        @TruthHertz
        Somehow I doubt an ignorant racist like you knows many "black folks". Are you still dating your sister?
      reattadudes
      • 4 Months Ago
      much to do about nothing. subprime makes up about 6%-8% of all loans. GM Financial was formerly Americredit, and they are experts with subprime lending. they never lost any money, even back in the financial meltdown years of 2008-2011. they know what they're doing, and that's why GM bought them. its quite elementary why this is a huge market. in a world where excellent credit customers are getting 2 1/2% interest loans, there is an untapped market for sub 600 FICO scores where they can charge 10%-13% interest. I was looking thru some of my old car purchase orders, and its truly funny to read them. the interest rate on my 1980 Plymouth Champ (bought new October 3, 1979, for $5,250) was 17% (the prime rate then was 18.5%). my 1990 Avanti 4 door, bought new in May of 1990, was financed with GMAC, "A" tier (excellent credit score) was a smokin' deal at 10.75% interest. the rates that GM Financial is charging don't look too bad, and they are providing a great service for many customers. I get tired of people signing on the dotted line, and then griping later. no one held a gun to their head to sign, and they aren't charging them 25% interest, either.
        BYALTF
        • 4 Months Ago
        @reattadudes
        According to a report report from GM, 88% of their consumer receivables is subprime. I don't blame GM for going after the money, but it does cheapen their brands. GM is managing to stay a top car maker by aggressively selling to lower income. GM products far over represented in trailer park and low income apartments. I imagine there are many customers that stay away to distance themselves form the riff raff. I think even GM is embarrassed about it, since they said they will no longer provide this data. "GM is relying on subprime borrowers far more than its competitors, though. The company's third-quarter financial report informed investors that "88 percent of the consumer finance receivables in North America were consumers with FICO scores less than 620," which is the “less than perfect" credit threshold for the subprime market. Consumer receivables 31 or more days past due, at $1.075 billion, were 34 percent higher than a year earlier. By contrast, Ford's receivables in that same category dropped by 20 percent during this year's first nine months." - See more at: http://www.thefiscaltimes.com/Articles/2013/11/12/GM-Steering-Toward-Another-Subprime-Loan-Crisis#sthash.ww4KHuUT.dpuf
      Yellow Jacket
      • 4 Months Ago
      This is what happens when the government destroys all the cheap used cars on the market.
      Jay
      • 4 Months Ago
      Wait, I thought Hyundai was king of the subprime market?
      svntsvn
      • 4 Months Ago
      Investigated for subprime lending... Which is code for how do you run your lending arm and how do you decide what the criteria is, for we don't want people who are living check to check getting rectally gaped by high interest rates. Well folks, its CAPITALISM. When you can make money off those who barely have it and have already ruined their credit anyway, why not, just lined the pockets of all the investors and even the government motors payback money came off the poor slobs who are busting away to make a living. And to the moron HERTZ employee who made a comment: Did you feel the need to inject race into the subprime discussion, because if you did, good job on being ignorant. Way to make your employer look like a great place to rent cars with racist employees.
        TruthHertz
        • 4 Months Ago
        @svntsvn
        My user name is predicated upon a homonym for Truth Hurts, but more aimed at electric car discussions. It has nothing to do with a rental agency. You can make a username anything you want on this site. As far as my comment, it was more of a satirical remark towards people buying what they don't need and the fact that black people have been hit harder by sub prime predatory lending during the downturn. This in spite of having "one of their own" in the executive branch. Pick up a newspaper once in a while and chip away at all the ignorance that your government schools have left you with. Thanks for feeding the troll dummy...
        dComments
        • 4 Months Ago
        @svntsvn
        I would be fine saying that it's capitalism but it isn't if they fail and the govt and taxpayers bail them out only to let them do it again. If they were allowed to fail due to their mistakes, then I'm fine with letting capitalism run its course.
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