More borrowers are falling behind on their car payments and the total amount of outstanding debt is reaching new high marks, according to Experian's latest report.
Experian said the balance of loans that were 60 days delinquent jumped 27%, to roughly $4 billion, in the third quarter from the same period a year ago.
Some of the highest delinquency rates were found in Mississippi, South Carolina and Alabama. North Dakota had the lowest delinquency rate. Finance companies, which tend to focus more on subprime customers than traditional banks, had the largest increases in delinquencies in the quarter, according to Experian.
Analysts have warned that a loosening of underwriting standards for subprime auto loans could cause widespread losses in the financial system because much of the debt has been securitized and bought by investors worldwide.
Regulatory scrutiny has mounted along with the rise in delinquencies. Subprime auto lenders are getting more attention from regulators, concerned that the high-cost loans take advantage of more vulnerable borrowers. The examinations have touched on virtually every player in the broader subprime auto lending ecosystem from used car dealers to lenders.
The American Honda Finance Corp., a lending unit of the automaker, disclosed on Tuesday that the company was bracing for an enforcement action from the Justice Department and the Consumer Financial Protection Bureau surrounding concerns that it gives more costly loans to minority borrowers. The authorities, the company said in a regulatory filing on Tuesday, notified the lender last month about the looming action.