Could bad auto loans cause the next economic crisis?

Could bad auto loans cause the next economic crisis?

- More Americans are getting car loans. Experts say that for the first and second quarters of this year, loans topped the $1 trillion mark. But, at the same time, the number of people who are failing to make their monthly payments is also on the rise.

Chris Kukla is the executive vice president of Center for Responsible Lending, a research and advocacy group that fights against abusive lending practices. He says the number of people who are not making their monthly car loan payments for 30 and 60 days is a red flag. He says hundreds of thousands of people could lose their cars.

Kukla points to subprime loans. Those are loans being made to people with poor or risky credit history and the loans usually have higher interest rates. That is a factor that led to the housing mortgage crash in 2008. Kukla says the auto market is not the size and scope of the housing mortgage market, but there are similarities. He says loans to lower-credit-score customers have nearly doubled in four years, which is significant growth.

Hannah Lutz, a reporter for Automotive News, says credit reporting agencies -- TransUnion, Equifax and Experian -- are not concerned about the 30- and 60- day delinquencies. She says the percentage is actually low. Lutz says car dealerships have a personal stake in the process and aren't willing to risk their reputations. She says local dealerships want to help customers make the right loan because if they don't their business will suffer.

But Kukla strongly disagrees. He says people who can't afford to buy cars are getting 6- and 7-year loans. He says troubling trend is people trading in cars they still owe money on and rolling that balance into a new loan. Kukla believes federal regulators need to step in to prevent another economic calamity.

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