CFPB Orders $1.5 Million Penalty for Misrepresentation of Finance Charges for Auto Title Loans

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The CFPB recently entered into a settlement for approximately $1.5 million with a financial services company that allegedly deceived consumers by failing to disclose accurate finance charges associated with auto title loans in violation of the Consumer Financial Protection Act, TILA, and its implementing regulation, Regulation Z.

According to the consent order, the company, through its operating subsidiaries, offered auto title pledges in Mississippi as purportedly single-payment transactions with a 30-day maturity date.  However, the company allegedly also provided a 10-month repayment schedule for consumers to sign contemporaneously, but failed to disclose the actual finance charges required under the 10-month payment schedule.  As a result, consumers allegedly paid more than five times the amount of finance charges that were actually disclosed on the payment schedule.  The CFPB found that such omissions were likely to mislead consumers and thus, these representations constituted deceptive acts and practices.

Additionally, the company allegedly displayed in-store advertisements for certain payday and auto title pledges that showed the payment amounts but failed to disclose the annual percentage rate as required.  Therefore, the CFPB also found violations of TILA and Regulation Z.

Under the terms of the consent order, the company and its subsidiaries are prohibited from misrepresenting the cost and other terms of auto title loans.  Also, the company is ordered to pay a civil penalty of approximately $1.5 million to the CFPB.  However, the full payment is suspended subject to the company paying $500,000 to provide redress to affected consumers.

The consent order is available here, and the CFPB’s press release is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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