Privacy Concerns By Auto Lenders Shape SEC Asset-Backed Security Rule

It took four years, but the Securities and Exchange Commission has put the final touches on a rule regarding asset-backed securities — including auto loans and leases — and what information is given when a company or investor takes on an ABS.

Juan Barnett of DC Car Geek reports the work on the rule began in 2010, re-proposed with the inclusion of Dodd-Frank Act requirements in 2011, and brought up for consideration again earlier this year. Barnett adds that a total of 240 comments — the majority from financial institutions — were submitted to the SEC in the same period.

As far as the automotive finance industry goes, a consortium dubbed Vehicle ABS Sponsors delivered a 97-page comment in 2012, bringing up numerous concerns about the rule.

One concern in particular focused on privacy issues. Were the then-proposed framework to be enacted, the consortium feared competitors from within and outside the ABS market would use the massive amounts of data collected by its members to upend the industry as a whole:

Ordinarily, we would consider someone appropriating our data to be wrongfully taking our private property and harming us in the marketplace. We think it is highly inappropriate for a government-mandated program to permit, and indeed facilitate, this practice.

Earlier this year, SEC Commissioner Michael Piwowar acknowledged those and similar concerns, suggesting those who do participate in the ABS market "simply follow the statute and require disclosure of asset-level data only if such data is necessary for investors to independently perform due diligence."

Thanks to a rule modification regarding the sharing of loan-level data, both sides of the ABS game — issuers and investors — can use a private database to talk amongst themselves. Previously, the data would have been made readily available through the SEC's public database, EDGAR.

The post Privacy Concerns By Auto Lenders Shape SEC Asset-Backed Security Rule appeared first on The Truth About Cars.

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