CFPB Settles with Auto Finance Company for Alleged UDAAP Violations



[author: Viona Harris]

On October 13, 2020, the Consumer Financial Protection Bureau (CFPB) announced that it had entered into a consent order with an auto finance company, alleging that the company’s repossession practices from 2013 through 2019 constituted unfair and deceptive acts and practices under the Consumer Financial Protection Act (CFPA).

Specifically, the CFPB alleged that the company engaged in unfair acts or practices by informing consumers that it would not repossess their vehicles if the consumers either paid, promised to pay, or agreed to an extension agreement with the company to decrease their delinquency to under 60 days past due, but that the company nonetheless repossessed the vehicles of consumers who met these conditions. Additionally, the CFPB alleged that the company, acting through its repossession agents, did not allow consumers to recover their personal property from vehicles that had been repossessed until those consumers paid upfront repossession fees. The company is also alleged to have charged consumers varying fee amounts for over-the-phone payments, without disclosing the difference in fees for in-network debit card payments ($5) compared to out-of-network debit card payments ($12.95). Instead, the company said that “transaction fees may apply.”

The CFPB also alleged that the company engaged in deceptive acts or practices by sending consumers extension agreements that stated, “As a condition of you making this request, you represent that you have not filed and agree that you will not file for bankruptcy protection within 120 days after the date of this correspondence, and that an extension is contingent upon the absence of any such filing.” The CFPB alleged that this language was deceptive since it created the impression that consumers could not file for bankruptcy, even though any agreement to waive an individual’s right to file for bankruptcy is void as against public policy.

Under the consent order, the company agreed to pay the CFPB a civil money penalty of $4 million. The company also agreed to provide up to $1 million in consumer redress to consumers who were subject to wrongful repossession and is prohibited from further engaging in the actions described above.

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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