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On January 4, the Colorado Attorney General announced that his office entered into assurances of discontinuance (available here and here) with two credit unions that will result in $4 million being refunded to Colorado borrowers who were entitled to refunds of guaranteed automobile protection (“GAP”) fees. These settlements follow an investigation by the Consumer Protection Section of the Colorado Department of Law, which found that the credit unions historically failed to refund unearned GAP fees owed to consumers.…

Continue Reading Colorado AG Secures Latest Settlement over Unearned GAP Fees

On January 4, the CFPB and the New York State Office of the Attorney General filed a complaint against a prominent subprime auto lender in the Southern District of New York. The complaint alleges that the auto lender misrepresented costs in loan agreements and tricked customers into high-cost loans on used cars in violation of the CFPA and New York usury limits. Specifically, the complaint alleges that the auto lender harmed consumers in the following ways:…

Continue Reading CFPB and New York AG File Suit Against “Predatory” Auto Lender

On July 29, the CFPB and DOJ issued a joint letter to the auto lending and leasing industry reminding auto companies of their obligations under the Servicemembers Civil Relief Act (SCRA). The SCRA affords special protections to servicemembers and their dependents against unfair or predatory practices by auto lenders, including:
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Continue Reading Regulators Remind Auto Industry of Servicemember Protections

On June 23, the FTC proposed a rule that would prohibit junk fees, bait-and-switch advertising, and other deceptive practices by auto dealers to protect consumers and honest dealers in the car-buying process. The proposed measures would:
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Continue Reading FTC Targets Junk Fees, Bait-and-Switch Advertising by Auto Dealers

On May 2, the CFPB published a blog post demonstrating its commitment to “a fair, transparent, and competitive auto lending market” by calling attention to add-on products for which auto dealers and finance companies “often charge consumers all payments for any add-on products as a lump sum at origination of the auto loan, and they generally include the lump sum cost as part of the total vehicle financing agreement.”  CFPB examiners have focused on how servicers manage these add-on product charges when the loan ends prior to when the add-on product’s potential benefits end.
Continue Reading CFPB Blog: Stop Overcharging for Auto Loan Add-on Products

On March 31, the FTC and Illinois State Attorney General announced a settlement of charges against a large, multistate auto dealer that allegedly discriminated against black consumers and included illegal junk fees for unwanted “add-ons” in customers’ bills.
Continue Reading FTC Imposes Record-Setting $10M Fine Against Multistate Auto Dealer, Settling Charges of Racial Discrimination and Unauthorized Charges

On February 28, the CFPB issued Bulletin 2022-4 regarding repossession of vehicles, and the potential for violations of the Dodd-Frank Act’s prohibition on engaging in unfair, deceptive, or abusive acts or practices (UDAAPs) when repossessing vehicles.  The CFPB has promised to use all appropriate tools to hold auto lenders and servicers accountable if they engage in UDAAPs in connection with their activities.  Based on recent examinations and enforcement actions, the CFPB has observed the following activity in the auto finance industry:  illegally seizing cars, sloppy record keeping, unreliable balance inquiries, and ransom for personal property.
Continue Reading CFPB: Auto Loan Servicers Must Ensure Lawful Repossessions

On February 24, the CFPB posted a blog citing that the recent increase in car prices will result in both the total amount of debt and the average loan size to continue to increase, which will put increased pressure on some consumers’ budgets for much of the next decade. According to data from the Bureau of Labor Statistics, the Consumer Price Index (CPI) for used cars and trucks increased 40% percent since January 2021 while the CPI for new cars increased 12 percent. In the face of such challenges, the CFPB plans to focus on:
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Continue Reading CFPB to Monitor Lenders During Expected Increase in Auto Loan Debt

Last month, the FTC issued an advisory opinion clarifying that the Holder Rule does not preempt any state laws that put more liability on banks that are the “holders” of a loan contract, and in particular, the rule does not limit recovery of attorneys’ fees and costs when state law authorizes awards against a holder (we previously discussed the advisory opinion in an earlier Consumer Finance & FinTech Blog post here). …
Continue Reading Auto Finance Companies May Face Risk From Holder Rule, Pending California Supreme Court Case

On January 28, the FTC announced that it banned an automotive marketing company and its owner from the auto industry for the next twenty years for allegedly engaging in unfair and deceptive practices in violation of the FTC Act and failing to comply with the Truth in Lending Act’s (TILA) disclosure requirements.  According to the FTC’s opinion, the company sent mail advertisements directing consumers to visit auto sales websites, inaccurately suggesting that these websites were affiliated with a government COVID-19 stimulus program. Consumers also received direct mail advertisements from the company purportedly informing them that they had won specific and valuable cash prizes that could be collected upon visiting a car dealership. Once consumers visited the dealerships as directed, they learned that they had not won the prize listed in the mailings.  The company was also found to violate TILA’s requirements for advertising “closed-end credit” to prominently disclose key financing terms that consumers need to determine the true cost of the advertised car loans.
Continue Reading FTC Order: Auto Marketing Company and Owner Banned From Industry for Misleading Consumers

On December 14, the California Department of Financial Protection and Innovation (DFPI) announced that it entered into a consent order with an LA-based auto title lender to resolve allegations that the company violated California’s the Fair Access to Credit Act’s (FACA), which prohibits making loans of $2,500 to $10,000 with interest rates greater than 36 percent.  The focus of the consent order was the auto title lender’s partnership with a Utah state-chartered bank to provide the bank with marketing and servicing services in connection with auto title loans offered to California consumers.  The company offered these services at the same time that FACA amended the California Financing Law to prohibit licensed lenders from making loans with principal amounts of $2,500 to less than $10,000 with interest rates greater than 36 percent, plus the federal funds rate.  The company was served a subpoena seeking documents and information last year to assess whether the company was evading California’s newly enacted interest rate caps through a partnership with the out-of-state bank.  After the investigation, the company ceased marketing auto loans of less than $10,000 to California borrowers.
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Continue Reading DFPI Issues Consent Order to Auto Title Lender