CFPB Reaches Settlement with Automobile Loan Servicer for Unfair Practices Related to Loss Damage Waivers

Troutman Pepper

Troutman Pepper

On September 21, 2020, the Consumer Financial Protection Bureau (“CFPB”) announced the settlement of its administrative proceeding against Lobel Financial Corporation (“Lobel”) – a California automobile lender that the CFPB claimed had engaged in unfair practices with respect to its Loss Damage Waiver (“LDW”) product. The action against Lobel alleged multiple violations of the Consumer Financial Protection Act (“CFPA”). A copy of the consent order entered into between the CFPB and Lobel can be found here.

The CFPB alleged that, in situations where a borrower had insufficient automobile insurance, Lobel would place its LDW product on the account and charge a monthly premium of approximately $70 for the LDW coverage. This LDW coverage was in lieu of force-placing collateral-protection insurance and had been represented as a product where Lobel would pay for the cost of covered repairs and, in the event of a total vehicle loss, cancel the borrower’s debt.

Instead, according to the CFPB:

  • Lobel charged customers LDW premiums after they had become ten-days delinquent on their auto loans but did not provide them with LDW coverage. When these customers needed repairs or experienced total vehicle losses, Lobel denied their claims.
  • Lobel assessed LDW-related fees against some customers that Lobel had not disclosed in its LDW contract.

Both of these actions were alleged to violate the CFPA. Under the consent order, Lobel will pay $1,345,224 in consumer redress to approximately 4,000 harmed consumers and a $100,000 civil money penalty. The order also prohibits Lobel from failing to provide consumers with LDW coverage or similar products or services for which it has charged consumers or from charging consumers fees that are not authorized by its LDW contracts.

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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