Auto Lending

Subscribe to Auto Lending via RSS

On September 8, 2026, the Internal Revenue Service (IRS) published final regulations implementing the interest deduction on loans for the purchase of specified vehicles assembled in the U.S. Taxpayers’ ability to deduct that interest comes with reporting and disclosure requirements for applicable lenders, similar to the requirements imposed on persons receiving mortgage loan interest. The final regulations become effective on November 9, 2026, and the deadline to provide interest statements to applicable taxpayers is January 31, 2027.

In 2025, Congress passed legislation providing the temporary ability to deduct up to $10,000 of interest paid on loans for the purchase of vehicles assembled in the U.S. That ability applies to indebtedness incurred after December 31, 2024, and continues through the taxable year ending December 31, 2028. The final regulations provide the following parameters for that interest deduction eligibility.

Continue Reading Lenders Must Report Interest on U.S. Auto Loans

Litigation involving Colorado’s opt-out from the interest exportation provisions of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) has taken an adverse turn for the financial services industry. On November 10, the United States Court of Appeals for the Tenth Circuit issued a ruling reversing a preliminary injunction imposed by the United States District Court for the District of Colorado in June 2024 that prevented enforcement of Colorado’s usury restrictions against parties to the litigation, including any members of various industry association parties—the National Association of Industrial Bankers, American Financial Services Association and American Fintech Council—with respect to loans in which the lender was not located, for interest exportation purposes, in Colorado. Subject to further proceedings, the Tenth Circuit’s ruling re-opens the door for loans originated by state-chartered banks and similar financial institutions to be subject to Colorado usury restrictions when either: (i) the borrower is located in the state; or (ii) subject to certain exceptions, the lender is located in the state, regardless of the location of the borrower. The ruling will become effective, if at all, only after issuance of the Tenth Circuit mandate, which may be stayed pending further appellate proceedings as discussed below.

As addressed in our prior discussion of the Colorado DIDMCA opt-out and related litigation, DIDMCA provides the basis, under federal banking law, for state-chartered, FDIC-insured banks and certain similar financial institutions to “export” the interest-related requirements of their home or, in certain cases, branch office (host) states when lending elsewhere. Both national banks and state-chartered banks have such authority, but DIDMCA conditions state-chartered banks’ authority on the ability of individual states to opt out of the interest exportation regime under 12 U.S.C. § 1831d. Iowa and Puerto Rico have had longstanding opt-outs; certain other states initially opted out but later repealed such opt-outs; and Colorado enacted an opt-out that would have become effective July 1, 2024 but for litigation by industry participants that resulted in the June 2024 preliminary injunction. 

Continue Reading DIDMCA Opt-Out Update — Tenth Circuit Reverses Colorado Preliminary Injunction

Although the Fifth Circuit Court of Appeals vacated the Federal Trade Commission’s (“FTC”) Combating Auto Retail Scams Trade Regulation Rule (“CARS Rule”) on January 27, 2025, the FTC and state attorneys general continue to target the auto sales and lending industries through enforcement actions and legislation. Among those efforts, the California legislature is considering its…

On January 27, 2025, the Fifth Circuit Court of Appeals held that the Federal Trade Commission’s rule to curb certain practices in the automobile dealer industry was invalid on procedural grounds because the agency did not issue an advance notice of proposed rulemaking.

On January 4, 2024, the Federal Trade Commission (“FTC”) published a final “Combating Auto Retail Scams Trade Regulation Rule,” or “CARS Rule.” The rule was scheduled to become effective on July 30, 2024. The FTC issued that rule after publishing a proposed rule for public comment in July 2022 and after a series of public roundtables with input from industry participants, consumers, and others.

The final rule provides that certain acts or practices of motor vehicle dealers are prohibited as unfair or deceptive, including misrepresentations about the costs or terms of purchasing, financing, or leasing a vehicle or of any add-on product or service (such as extended warranties, service and maintenance plans, payment programs, guaranteed automobile or asset protection (“GAP”) agreements, emergency road service, VIN etching and other theft protection devices, or undercoating). The final rule also would prohibit misrepresentations regarding many other aspects of purchasing or financing a vehicle, or the circumstances under which a vehicle may be repossessed.

The final rule also provides that it is a prohibited unfair or deceptive act or practice not to disclose in advertisements or consumer communications a vehicle’s full cash offering price (excluding only government charges), or not to disclose that an add-on product or service is voluntary (if true). When making any representations about the amount of monthly payments for vehicle financing, the final rule provides that the dealer must disclose the total amount the consumer will pay after making all payments, including the amount of any down payment or trade-in.

As to add-on products or services, the final rule provides that it is a prohibited unfair or deceptive act or practice for a dealer to charge for any such product or service that provides no benefit to the consumer, including certain nitrogen-filled tire-related products or services; products or services that are merely duplicative of otherwise applicable warranty coverage; or any item without the consumer’s express, informed consent.

The auto dealer and finance industries quickly objected to the rule, arguing in part that the FTC did not adequately consider the costs of the rule and that the rule is arbitrary and capricious. The FTC then determined that it was in the interests of justice to stay the rule’s effective date to allow for judicial review.

The Fifth Circuit did not address the validity of the rule’s substantive provisions, or the FTC’s authority to declare those or other practices as unfair or deceptive. However, the court held that the final rule is invalid because the FTC did not issue an advance notice of proposed rulemaking (“ANPRM”) prior to issuing its proposed rule.

Continue Reading Fifth Circuit Vacates the FTC’s CARS Shopping Rule

For the most recent edition of Supervisory Highlights, the Consumer Financial Protection Bureau focused on examiners’ findings in the auto finance sector. Several of these practices were identified by the CFPB in prior Supervisory Highlights. Many of the CFPB’s concerns relate to trends in the marketing, sales, financing, and refunds related to add-on products like optional vehicle- or payment-protection, and to consumers’ difficulty in cancelling those products or receiving refunds. The Federal Trade Commission and state regulators also have prioritized these areas, and several states have recently passed legislation addressing add-on products (including refunds, cancellation and notification). In several of the findings, the CFPB noted that the failures related to inadequate oversight of service providers, reflecting another recurring theme in CFPB’s compliance management expectations.

The CFPB has framed many of these targeted practices as unfair, deceptive or abusive acts or practices (“UDAAP”), which is consistent with certain of the agency’s recent consent orders or suits related to auto servicing practices.

In response to the findings, the CFPB generally demanded ceasing the allegedly noncompliant practices, developing policies and procedures to ensure compliance going forward, and in some cases refunding amounts to consumers.

Motor vehicle dealers, auto finance companies, servicers and secondary market purchasers of auto loans should take note of these highlighted practices when evaluating their policies and procedures.

Continue Reading CFPB Supervisory Highlights Target Certain Auto Lending and Servicing Practices

In response to the significant ambiguities raised by New Hampshire’s recent amendments to its Motor Vehicle Retail Installment Sales Act — not to mention their immediate effectiveness and draconian liability provisions — the state’s Banking Department has issued several nuggets of guidance.

Recently, the Department sought to address the pressing question of whether persons involved in various financing transactions and securitizations involving motor vehicle retail installment contracts must now obtain a license. As of August 26, 2024, the Department’s web site states that securitization trusts that are established for the purpose of pooling retail installment contracts and reconstituting them into securities are not required to obtain a sales finance company license in the state. While the Department stated further that the licensing requirement will typically be fulfilled by the servicer or other entity responsible for servicing the contracts in the securitization trust, it did not expressly address the licensing obligations applicable in other types of financing transactions or to other types of special purpose entities. We expect that a similar licensing exemption would apply to those transactions and entities, because the servicer would need to be licensed or an exempt entity.

Continue Reading New Hampshire Banking Department Clarifies Licensing for Motor Vehicle Financing

On August 2, 2024, New Hampshire enacted legislation that significantly revises its Motor Vehicle Retail Installment Sales Act, effective July 1, 2024.

Unfortunately, that effective date is not a typographical error. The New Hampshire Banking Department apparently tried during the legislative process to extend the effective date until January 1, 2025, but that extension did not make it into the enacted bill. While the bill was enacted with an effective date of July 1, 2024, the Department attempts at least to provide assurances that the bill became effective upon signing, and not retroactively. Still, the effective date of the amendments is just one of the topics requiring clarification.

Continue Reading New Hampshire Significantly Amends its Motor Vehicle Retail Installment and Sales Finance Company Act

Mayer Brown has published a new edition of Licensing Link, a periodic publication that will keep you informed on hot topics and new developments in state licensing laws, and provide practice tips and primers on important issues related to state licensing across the spectrum of asset classes and financial services activities.

In this issue, we…

Mayer Brown has published a new edition of Licensing Link, a periodic publication that will keep you informed on hot topics and new developments in state licensing laws, and provide practice tips and primers on important issues related to state licensing across the spectrum of asset classes and financial services activities.

In this issue, we…

Mayer Brown is publishing its first edition of Licensing Link, a new periodic publication that will keep you informed on hot topics and new developments in state licensing laws, and provide practice tips and primers on important issues related to state licensing across the spectrum of asset classes and financial services activities.

In this…