Alicia Saffold, who received a loan with an interest rate of nearly 24 percent, in Columbus, Ga., April 5, 2014. Millions of Americans are receiving auto loans they cannot possibly afford, in a lending climate marked by some of the same lack of caution seen in the housing industry before its 2008 implosion. (Tami Chappell/The New York Times)

Rodney Durham stopped working in 1991, declared bankruptcy and lives on Social Security. Nonetheless, Wells Fargo lent him $15,197 to buy a used Mitsubishi sedan.

“I am not sure how I got the loan,” Durham, 60, said.

Durham’s application said he made $35,000 as a technician at Lourdes Hospital in Binghamton, New York, according to a copy of the loan document. But he says he told the dealer he hadn’t worked at the hospital for more than three decades. Now, after months of Wells Fargo pressing him over missed payments, the bank has repossessed his car.

This is the face of the new subprime boom. Durham is one of millions of Americans with shoddy credit who are easily obtaining auto loans from used-car dealers, including some who fabricate or ignore borrowers’ abilities to repay. The surge in lending and the lack of caution resemble the frenzied subprime mortgage market before its implosion set off the 2008 financial crisis.

The explosive growth is being driven by some of the same dynamics that were at work in subprime mortgages. A wave of money is pouring into subprime autos, as the high rates and steady profits of the loans attract investors. Some of the nation’s biggest banks and private equity firms are feeding the growth in subprime auto loans by investing in lenders and making money available for loans.

And, like subprime mortgages before the financial crisis, many subprime auto loans are bundled into complex bonds and sold as securities by banks to insurance companies, mutual funds and public pension funds – a process that creates ever-greater demand for loans.

The New York Times examined more than 100 bankruptcy court cases, dozens of civil lawsuits against lenders and hundreds of loan documents and found that subprime auto loans can come with interest rates that can exceed 23 percent. The loans were typically at least twice the size of the value of the used cars purchased, including dozens of battered vehicles with mechanical defects hidden from borrowers.

In another echo of the mortgage boom, The Times investigation also found dozens of loans that included incorrect information about borrowers’ income and employment, leading people who had lost their jobs, were in bankruptcy or were living on Social Security to qualify for loans they could never afford.

The size of the subprime auto loan market is a tiny fraction of what the subprime mortgage market was at its peak, and its implosion would not have the same far-reaching consequences. Yet some banking analysts and even credit ratings agencies that have blessed subprime auto securities have sounded warnings about potential risks to investors and to the financial system if borrowers fall behind on their bills.

Pointing to higher auto loan balances and longer repayment periods, the ratings agency Standard & Poor’s recently issued a report cautioning investors to expect “higher losses.” And a high-ranking official at the Office of the Comptroller of the Currency, which regulates some of the nation’s largest banks, has also privately expressed concerns that the banks are amassing too many risky auto loans, according to two people briefed on the matter.

Despite such warnings, the volume of total subprime auto loans increased roughly 15 percent, to $145.6 billion, in the first three months of this year from a year earlier, according to Experian, a credit rating firm. In their defense, financial firms say that subprime lending meets an important need: allowing borrowers with tarnished credits to buy cars vital to their livelihood.

Autos, of course, are very different from houses. While a foreclosure of a home can wend its way through the courts for years, a car can be quickly repossessed.

That ability to contain risk while charging fees and high interest rates has generated rich profits for the lenders and those who buy the debt. But it often comes at the expense of low-income Americans, according to the interviews with legal aid lawyers and officials from the Federal Trade Commission and the Consumer Financial Protection Bureau, as well as state prosecutors.

The Brokers

Inside a used-car dealership in Queens, New York, Julio Estrada perfected his sales pitches for the borrowers, including some immigrants who spoke little English. Sure, the double-digit interest rates might seem steep, Estrada told potential customers, but with regular payments, they would quickly fall.

The salesman was ultimately indicted by the Queens district attorney on grand larceny charges that he defrauded more than 23 car buyers with refinancing schemes.

Relatively few used-car dealers are charged with fraud. Yet the extreme example of Estrada comes as some used-car dealers are pushing sales tactics too far, according to state prosecutors and federal regulators. And these are among the thousands of used-car dealers who are working hand-in-hand with Wall Street to sell cars. Court records show that Capital One and Santander Consumer USA all bought loans arranged by Estrada, who pleaded guilty last year.

To guard against fraud, the banks say, they vet their dealer partners and routinely investigate complaints. Capital One has “rigorous controls in place to identify any potential issues,” said Tatiana Stead, a bank spokeswoman, adding that last year “we terminated our relationship with the dealership” where Estrada worked.

Even when authorities have cracked down on dealers, borrowers are still vulnerable to fraud. Shahadat Tuhin, a New York City taxi driver, bought a car from Estrada, who less than a year earlier had been indicted.

The charge by the Queens district attorney didn’t keep him out of the business. While his criminal case was pending, the salesman persuaded Tuhin to buy a used car for 90 percent more than the price he agreed upon. Needing the car to take his daughter, who has a heart condition, to the doctor, Tuhin said he unwittingly signed for a $26,209 loan with completely different terms than the ones he had reviewed.

Immediately after discovering the discrepancies, Tuhin, 42, said he tried to return the car to the dealership and called the lender, M&T Bank, to notify them of the fraud. The bank told him to take up the issue with the dealer, Tuhin said.

The Money

Investors, seeking a higher return when interest rates are low, recently flocked to buy a bond issue from Prestige Financial Services of Utah. Orders to invest in the $390 million debt deal were four times greater than the amount of available securities.

What is backing many of these securities? Auto loans made to people who have been in bankruptcy.

Prestige specializes in making the loans to people in bankruptcy, packaging them into securities and then selling them to investors.

Once lenders make the loans, they pool thousands of them into bonds that are sold in slices to investors, as is done with mutual funds, pensions and hedge funds.

Rating agencies, which assess the quality of the bonds, are helping fuel the boom. They are giving many of these securities top ratings, which clears the way for major investors, from pension funds to employee retirement accounts, to buy the bonds. In March, for example, Standard & Poor’s blessed most of Prestige’s bond with a triple-A rating. Slices of a similar bond that Prestige sold last year also fetched the highest rating from S&P. A large slice of that bond is held in mutual funds managed by BlackRock, one of the world’s largest money managers.

The vast majority of banks largely rely on dealers to screen potential borrowers. The arrangement, which means the banks rarely meet customers face to face, mirrors how banks relied on brokers to make mortgages. “Even when they are presented with clear evidence of fraud, the banks ignore it,” said Peter T. Lane, a consumer lawyer in New York.

The Risks

Even after getting a second job at Staples, Alicia Saffold, 24, a supply technician at the Fort Benning military base in Georgia, could not afford the monthly payments on her $14,288.75 loan from Exeter Finance. The loan, according to a copy of her loan document reviewed by The Times, came with an interest rate of nearly 24 percent. Less than a year after buying she bought the Pontiac G6, it was repossessed.

Exeter declined to comment on Saffold, but Blackstone, its parent company, emphasized that the credit quality of its lender’s loans was improving and that it worked hard to ensure its customers received the best rates.

Still, financial firms are beginning to see signs of strain. In the first three months of this year, banks had to write off as uncollectable an average of $8,541, up about 15 percent from a year earlier, according to Experian.

Some investors think the time is right to start selling their holdings. This year, for example, private equity firms, including Kohlberg Kravis Roberts & Co., sold most of their stake in the subprime auto lender Santander Consumer USA when the lender went public.

As a result, some rating agencies, even those that had blessed auto loan securitizations with high ratings, are starting to warn of losses that investors could suffer if the bonds start to sour. If those losses materialize, they could pummel a wide range of investors, from pension funds to insurance companies to mutual funds.

Thanks to an amendment to the Dodd-Frank financial overhaul, the vast majority of dealers are not overseen by the Consumer Financial Protection Bureau. Since its start in 2010, the agency has earned a reputation for aggressively penalizing lenders, but it has limited authority over dealers.

The Federal Trade Commission, the agency that does oversee the dealers, has cracked down on certain questionable practices. And although the agency has won a number of cases against dealers for failing to accurately disclose car costs and other abuses, it has not taken aim at them for falsifying borrowers’ incomes, for example.

And the help is not coming fast enough for borrowers like Durham or Saffold. “Buying this car was the worst decision I have ever made,” Saffold said.