Regulators to look at Capital One subprime finance

Capital One has become the latest in a growing list of lenders to have received subpoenas from state and federal regulators investigating possible problems in relation to subprime auto finance originations and securitizations.

According to a regulatory filing with the Securities and Exchange Commission (SEC) made in late February, Capital One has received subpoenas from the New York District Attorney’s Office and the US Department of Justice (DoJ), requesting information related to its subprime auto finance business.

“Capital One is cooperating with both investigations,” the SEC filing states. The company also says in its SEC submission that it recognizes the regulatory climate has been more demanding, with state and federal regulators focusing on compliance in a number of areas, including data security, money laundering, fair lending and consumer-protection issues.

“We are subject to heightened regulatory oversight by the federal banking regulators to ensure we build systems and process that are commensurate with the nature of our business and that meet the heightened risk management and enhanced prudential standards issued by our regulators,” the SEC filing states. “We expect this heightened oversight will continue for the foreseeable future until we meet the expectations of our regulators and can demonstrate that our systems and process are sustainable.”

In January, Consumer Portfolio Services (CPS) revealed in a regulatory filing that it was also subpoenaed by the DoJ regarding its subprime auto finance practices and related securitizations. Santander Consumer USA, Ally Financial, GM Financial and Credit Acceptance are known to have received similar subpoenas, while last week JPMorgan Chase disclosed that the DoJ was looking into possible discrimination in its auto-lending practices.

Last month, Santander USA agreed to pay around $9.35 million to resolve a lawsuit filed by the DoJ relating to claims that the company had repossessed over 1,000 vehicles owned by serving members of the military during a five year period, in contravention of the Servicemembers Civil Relief Act.