On August 2, 2023, the CFPB filed a lawsuit in federal court against auto-loan servicer USASF Servicing (USASF) for a number of illegal practices that harmed individuals with auto loans. The CFPB is seeking to obtain redress for consumers and civil money penalties and stop any future violations.
From CFPB Director Rohit Chopra’s statement:
“The CFPB is suing USASF for a range of misconduct, including illegally activating devices that prevented borrowers from starting their cars. 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.”
USASF serviced auto loans that were originated by an affiliate, U.S. Auto Sales, Inc., which was a buy-here-pay-here auto dealer and lender. USASF offered both Guaranteed Asset Protection and collateral-protection insurance, which are products that consumers can buy when they buy or lease a car. In April 2023, U.S. Auto Sales closed most of its businesses.
The CFPB alleges that USASF:
Illegally disabled cars. USASF incorrectly disabled vehicles at least 7,500 times using a device known as “kill switches” or “starter interrupters” causing these devices to play warning tones in vehicles during periods when the consumer was not in default or was in communication with USASF about upcoming payments. In addition, USASF remotely disabled vehicles at least 1,500 times after explicitly promising consumers it would not do so.
Failed to refund premiums to consumers. USASF 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. Consumers were entitled to refunds of any premiums paid in advance for periods where they would no longer have coverage. However, USASF failed to obtain millions of dollars in refunds from the Guaranteed Asset Protection administrator.
Double-billed consumers and misapplied payments. When consumers were enrolled in collateral-protection coverage by a USASF affiliate, they were also charged for that same coverage by USASF. Approximately 34,000 consumers were double-charged for the insurance each billing cycle. USASF also wrongfully applied consumers’ extra loan payments first to late fees or collateral-protection insurance instead of accrued interest.
Wrongfully repossessed vehicles. USASF illegally repossessed the vehicles of some consumers who never qualified for repossession or had taken action to stop the repossession. In some instances USASF sold the vehicles that it had wrongfully repossessed.
Read the CFPB’s press release here.
The complaint can be found here.