On September 21, 2020, the Consumer Financial Protection Bureau (CFPB) entered into a consent order with an auto loan servicer to resolve allegations that the company charged customers for loss damage waiver coverage without actually providing it. According to the CFPB, this practice was unfair under the Consumer Financial Protection Act, 12 U.S.C. §§ 5531(c), 5536(a), because customers were charged for services they did not receive.
The CFPB alleged that the auto loan servicer would place a loss damage waiver coverage on borrowers’ accounts when the borrowers did not sufficiently cover the value of their vehicles through insurance. Although the servicer charged $70 per month for this service, the CFPB alleged that the servicer would regularly deny coverage despite customers paying the monthly fee and other associated charges.
To settle the CFPB’s investigation, the auto loan servicer agreed to pay approximately $1,350,000 in consumer relief to 4,000 affected consumers and $100,000 in civil money penalties. Under the settlement agreement, the servicer must also honor its loss damage waiver coverage and refrain from charging fees not authorized under its contracts with consumers.