We’ve made sure that applying for car finance is as simple and straight forward as possible. Borrowing money from a finance company isn’t necessarily a bad idea, but you should first learn what these companies are, how they operate, who regulates them, and what protections you have if you run into problems. If your credit is not stellar, an auto finance company that specializes in the subprime market may offer you a loan, but at a much higher interest rate. Furniture and appliance stores, such as Seffner, Florida-based Rooms to Go, also offer consumers a line of credit through a finance company.
CarePayment of Lake Oswego, Oregon – which works with health care providers nationwide and provides a way for people to pay medical bills – is another example of a finance company. Depending on the size of the company, it may be licensed in one state or dozens of states, says Danielle Fagre Arlowe, senior vice president of the American Financial Services Association, a trade association for the consumer credit industry that represents traditional installment lenders, such as the big auto finance companies.
Under a rule issued June 10, 2015, the CFPB will have authority over companies that make, acquire or refinance at least 10,000 auto loans or leases per year. The bureau estimates that 34 auto finance companies would fall under that regulation, and these account for about 90 percent of all auto loans and leases not made by banks. The rules mean auto finance companies will be not be allowed to use deceptive practices to market loans or leases, or mislead consumers about the loan benefits or terms.
Auto finance companies also will be prohibited from discriminating against consumers when lending based on factors such as someone’s race, gender, and age, or based on whether the person receives public assistance. Unlike credit card companies, finance companies are not required to give consumers the same payment due date each month. Many finance companies report your payment record to the three main credit bureaus, helping you build a credit history, Arlowe says.
Kukla warns that some finance companies may only report to the credit bureaus if you are late making payments. Other finance companies, such as those associated with major automotive companies, will treat you well because they have the automakers’ reputations to protect. If you are considering getting financing through a finance company, you should check to make sure it is licensed in your state, Sherry says.