On May 2, 2022, the CFPB published an article to highlight its initiative in ensuring a fair, transparent, and competitive auto lending market, including taking action against sloppy servicing practices that cause harm. As we published previously, the Bureau released a bulletin in late February which aims to mitigate illegal automobile repossessions.
The CFPB examiners focused on the way servicers handle add-on product charges when the loan ends, which is when the add-on product’s potential benefits end. According to the CFPB, some auto dealers and finance companies overcharge optional, add-on products by charging consumers all payments for any add-on products as a lump sum at origination of the auto loan. In particular, the examiners found that servicers engaged in unfair practices by failing to request refunds from the third-party administrators for “unearned” fees related to one such add-on product and failing to apply the applicable refunds to the accounts after repossession and cancellation of the contracts. In addition, the examiners found that some servicers miscalculated ancillary auto product refunds after repossession and attempted to collect miscalculated deficiency balances.
To address the said findings, the servicers were required to review their processes and remediate affected consumers.
The CFPB’s blog post can be found here.
The CFPB’s Spring 2022 Supervisory Highlights can be found here.