Advertisement

Capital One's Subprime Auto Lending Business Under Probe

Capital One Financial Corporation (COF) is the latest company to come under regulatory probe related to the subprime auto lending business. In its 10-Q for third-quarter 2014 released on Monday, the company revealed that it has received a subpoena from the office of New York District Attorney about its subprime auto finance operations.

Alongside, in its quarterly filing, Capital One disclosed that it has received subpoenas and testimony requests from the New York District Attorney’s office regarding some check casher clients of Commercial Banking business and the company’s anti-money laundering program. The company is cooperating with both the investigations.

Other companies that have also received subpoenas from various law enforcement and regulatory bodies regarding subprime auto lending business are Santander Consumer USA Holdings Inc, Ally Financial Inc. (ALLY) and General Motors Company’s (GM) in-house financing wing – GM Financial.

Capital One entered in the auto lending business in 1998 with the acquisition of Dallas based Summit Acceptance Corporation, an auto finance company specializing in subprime lending. Later in 2001, the company acquired San Diego, CA based PeopleFirst Inc. – one of the largest online providers of direct motor vehicle loans.

With gradual expansion, Capital One now stands as one of the major companies in U.S. auto lenders while Ally Financial Inc and Wells Fargo & Company (WFC) are among the others.

Undoubtedly, the latest legal issues mar investors’ confidence on the Capital One stock. However, no conclusion will be arrived at until the extent of the company’s involvement in the matters is revealed.

Capital One currently carries a Zacks Rank #3 (Hold).

Read the Full Research Report on COF
Read the Full Research Report on WFC
Read the Full Research Report on GM
Read the Full Research Report on ALLY


Zacks Investment Research