On November 20, the Consumer Financial Protection Bureau (CFPB) announced a settlement with a Texas-based financial services company, resolving allegations that the company violated sections 1031 and 1036 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536.
Specifically, the CFPB alleged that the company engaged in deceptive acts or practices in marketing an add-on product to its auto loans. The company marketed this product as a means to cover the “gap” between the consumer’s primary auto insurance payout and the consumer’s outstanding auto loan balance in the event that a consumer suffered a total loss of his or her vehicle. The product, however, was subject to a loan-to-value limitation that would result in certain consumers not receiving this advertised benefit.
The CFPB also alleged that the company misrepresented the impact of receiving a loan extension to consumers. The company allegedly hid from consumers that additional interest accrued during the extension period would be paid before any payments to principal when the consumer resumed making payments.
Under the consent order, the company will pay $9.29 million in restitution to affected consumers through a combination of direct payments and statement credits, and a $2.5 million civil money penalty.