Via Ally’s 10-Q
Ally and its subsidiaries, including Ally Bank, are or may become involved from time to time in reviews, investigations, and proceedings (both formal and informal), and information-gathering requests, by government and self-regulatory agencies, including the FRB, FDIC, Utah Department of Financial Institutions (UDFI), Consumer Financial Protection Bureau (CFPB), U.S. Department of Justice (DOJ), SEC, and the Federal Trade Commission regarding their respective operations.
Such requests currently include subpoenas from each of the SEC and the DOJ. The subpoenas and document requests from the SEC include information covering a wide range of mortgage-related matters, and the subpoenas received from the DOJ include a broad request for documentation and other information in connection with its investigations of potential fraud and other potential legal violations related to mortgage-backed securities, as well as the origination and/or underwriting of mortgage loans.
In addition, we recently received a document request from the SEC in connection with itsinvestigation related to subprime automotive finance and related securitization activities.
Further, in December 2013, Ally Financial Inc. and Ally Bank entered into Consent Orders issued by the CFPB and the DOJ pertaining to the allegation of disparate impact in the automotive finance business, which resulted in a $98 million charge in the fourth quarter of 2013. The Consent Orders require Ally to create a compliance plan addressing, at a minimum, the communication of Ally’s expectations of Equal Credit Opportunity Act compliance to dealers, maintenance of Ally’s existing limits on dealer finance income for contracts acquired by Ally, and monitoring for potential discrimination both at the dealer level and within our portfolio of contracts acquired across all dealers. Ally formed a compliance committee consisting of certain Ally and Ally Bank directors to oversee Ally’s execution of the Consent Orders’ terms. Failure to achieve certain remediation targets could result in the payment of additional amounts in the future.
Investigations, proceedings, regulatory actions, or information-gathering requests that Ally is, or may become, involved in may result in material adverse consequences including without limitation, adverse judgments, settlements, fines, penalties, injunctions, or other actions.
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And this comes on the heels of GM Financial’s admission of Subprime Auto Loan Probes (via Bloomberg)
Investigations of the subprime auto finance business are spreading as General Motors Co. (GM) said its lending arm received additional subpoenas seeking details of its underwriting practices.
GM Financial, which specializes in loans to people with spotty credit, said in a regulatory filing yesterday that attorneys general of states it didn’t identify and other government offices are demanding documents related to its business of making car loans and pooling them into bonds that are sold to investors. The Detroit-based lender, along with Santander Consumer USA Holdings Inc., disclosed a similar probe by the U.S. Department of Justice in August.
The scrutiny is intensifying at the same time more borrowers are falling behind on their payments and sales of securities backed by the loans increase. Auto-finance firms that lend to people with bad credit lowered their standards amid increased competition as new entrants flooded the business to capitalize on cheap funding, according to Moody’s Investors Service.
“Subpoenas travel in packs,” Erik Gordon, a professor at the Ross School of Business at the University of Michigan, said by telephone. “There’s never one company in an industry subpoenaed because they’re mostly all doing the same thing.”