CFPB Enters $48 Million Consent Order with Indirect Auto Lender

Auto Finance  •  CFPB  •  Debt Collection  •  Dodd-Frank  •  FDCPA  •  TILA

CFPB

On October 1, 2015, the CFPB announced an enforcement action and consent order with an indirect auto lender for illegal debt collection and other practices.  It is alleged that the company’s actions violated the Fair Debt Collection Practices Act, the Truth in Lending Act, and the Dodd-Frank Act.

The illegal debt collection practices allegedly included deceiving borrowers by calling them under false pretenses and using fake caller ID information.  The company used a service that makes it appear that calls were coming from an unrelated business or family and friends.  The company also used this service to make it appear that the call was coming from law enforcement and then threatening to refer borrowers to criminal prosecution.  Finally, the company also disclosed debt information to the borrowers’ friends, family and employers.

The company is also accused of changing due dates on borrowers’ accounts or extending loan terms without consulting them first.  The company told borrowers that modified schedules would have a positive effect for them, but the schedules allegedly resulted in additional interest owed over the course of the loan.  It is also alleged that the company advertised monthly interest rates on its auto loans without disclosing the annual percentage rate as required by the Truth in Lending Act.

The company entered into a consent order requiring it to overhaul its debt collection practices, modify its advertisement to comply with the Truth in Lending Act, provide $44.1 million in cash relief to borrowers, and pay a $4.25 million civil penalty.  The action comes the same week the CFPB announced an enforcement action against another auto lender for violations of the Equal Credit Opportunity Act, which is further evidence of the Bureau’s increased scrutiny of the auto lending industry.

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