Borrowers are paying more for auto loans in the last decade regardless of how good their credit score may be, according to an investigation released Wednesday by Consumer Reports.

In an analysis of auto loan data for 858,000 applications with 17 lenders in the U.S., the investigation found that many Americans were making higher payments on these loans than they likely should. The investigators note that this situation is the result of a hodgepodge of unclear laws regulating auto lenders across the U.S., limited knowledge on the part of borrowers and misleading practices used to convince them to accept loans they may not be able to afford.

This has resulted in a large portion of Americans who have become delinquent on their loan payments by taking on more debt than they can afford.

Possessing a good credit score usually increases the chances of securing favorable loan terms for borrowers. However, CR found that even among Americans with a credit score of 660 or more, a benchmark that signals good credit on the part of the borrower, they can still end up paying rates as high as 25% on an auto loan. The publication said 21,000 Americans in this credit category were paying 10% or higher in auto loan payments.

Why Americans are paying so much, regardless of how good their credit score may be, largely has to do with the legal and regulatory landscape that governs lending activities by auto lenders.

At the federal level, the Consumer Finance Protection Bureau only has a limited mandate for oversight over this industry and many states have "confusing and contradictory laws regarding how high rates can be set," according to the report.

Many lenders may not be setting their interest rates according to risk as is the typical practice in insurance underwriting. CR found the underwriting standards used by lenders are often very lax with only 4% of examined loans issued verifying a borrower's income or employment before issuing a loan.

Laws permit auto lenders to mark up the interest rates on their loans, which they regularly do by 1% to 2%.

Chuck Bell, programs director for CR, says that borrowers should be provided with more information about the terms they are agreeing to before they find themselves saddled with unaffordable debt.

“At a minimum, dealers should be required to disclose the different financing offers they get, and the interest-rate markups they receive, so buyers can choose the best offer, or arrange for cheaper financing on their own,” said Bell.

Borrowers often find themselves agreeing to bad terms by focusing on the wrong factors when making a car purchase. Experts interviewed by CR suggested that many borrowers are focused on the price of the car more than the financial terms, which can backfire as lenders may take advantage of ignorance on their part.

Auto debt makes up a noticeable portion of household debt in the U.S. According to an analysis by the Federal Reserve Bank of New York in August, auto debt stands at $1.42 trillion, the highest category of household debt after mortgage and student loan payments.

CR reports that up to 25% of the borrowers they examined in their investigation were paying as much as 10% of their monthly income on auto loan payments.

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