In Announcing Lawsuit, CFPB Vows to Root Out Illegal Activity in the Auto Industry

August 3, 2023.  The CFPB has Filed Suit Against an Auto-Loan Servicer and Vows to Root Out Illegal Activity in the Auto Industry.

On August 2, 2023, the Consumer Finance Protection Bureau (CFPB) announced the filing of a lawsuit against an auto-loan servicer for alleged illegal acts and practices, which included:  disabling vehicles when borrowers were not in default; failing to refund premiums to consumers; double-billing practices; and wrongfully repossessing vehicles.  The CFPB is seeking to obtain redress for consumers, civil money penalties, and to stop any future violations.

“Given the rising cost of cars during the pandemic and jump in auto loan debt across the country, the CFPB is working to root out illegal activity in this market," said CFPB Director Rohit Chopra.

Regarding the lawsuit the CFPB alleges the following illegal practices against the defendant:

• Illegally disabling cars:  The defendant is alleged to have incorrectly disabled vehicles with installed GPS devices that contained "kill switches" or "starter interrupters" when consumers were not in default or when the consumer was in communication with the consumers about upcoming payments and promising consumers that would not disable the vehicles.
• Failing to refund premiums to consumers: The defendant is alleged to have offered consumers Guaranteed Asset Protection, which covers some of the difference (or gap) between the amount a borrower owes on their auto loan and what the car insurance will pay if the vehicle is stolen, damaged, or totaled.   However, when consumers paid off their loans early or the vehicle was repossessed and the accounts were charged-off, consumers were not refunded Guaranteed Asset Protection premiums paid in advance for periods where they would no longer have coverage. 
• Double-billing consumers and misapplying payments:  Consumers were allegedly enrolled in collateral-protection coverage by the defendants affiliate, and they were also charged for that same coverage by the defendant.  The defendant is also alleged to have wrongfully applied consumers’ extra loan payments first to late fees or collateral-protection insurance instead of accrued interest.
• Wrongfully repossessing vehicles:  The defendant allegedly repossessed vehicles illegally of some consumers who never qualified for repossession or had taken action to stop the repossession.  In some instances the defendant supposedly sold the vehicles that it had wrongfully repossessed.

"Compliance was never an option," says Adam Crowell, President & General Counsel at ComplyNet, "and with an agency like the CFPB vowing to root out illegal activity in the auto financing arena, dealerships and lenders need to adopt a comprehensive compliance program."  "Much more enforcement is coming."

With the myriad of laws and regulations impacting dealerships, consumer complaints will continue to occur and drive regulatory investigations.  ComplyNet works with thousands of dealerships across the company to provide solutions that help prevent illegal activities and regulatory violations, and to resolve consumer complaints before they evolve into investigations.

To learn more about ComplyNet's solutions for managing consumer complaints and compliance in the sales, F&I, and advertising departments, schedule a time to MEET WITH US.