On October 7, the CFPB
published a special edition of its
Supervisory Highlights focused on the auto finance market, which describes findings from examinations generally conducted between November 1, 2023 and August 30. The report highlights examiner observations such as the following:
Origination Disclosures:
- Subprime auto loan originators allegedly engaged in deceptive marketing by advertising “as low as” specified APR rates that consumers “had no reasonable chance of qualifying for…”
- Auto-loan originators allegedly violated TILA and its implementing Regulation Z, by inaccurately disclosing the terms for prepayment penalties.
Repossession Activities:
- Servicers allegedly wrongfully repossessed vehicles despite consumers making timely payments or obtaining loan modifications or other payment relief and without valid liens.
- The CFPB found that servicers allegedly engaged in unfair acts or practices by repossessing vehicles when: (i) representatives or service providers failed to cancel orders to repossess vehicles, or act on those cancellations, when consumers had made payments or obtained extensions that should have prevented repossessions; and (ii) consumers had requested, or the servicer had approved, a COVID-19 related loan deferment or loan modification, consumers had otherwise made timely payments, or consumers made arrangements to pay an amount sufficient to cancel the repossession.
Servicing Practices:
- Servicers allegedly misapplied payments on post-maturity loans, leading to late fees and extended principal balances.
- There were allegedly excessive delays in providing vehicle titles after loan payoff.
Add-on Products:
- Subprime auto-finance companies allegedly collected and retained amounts for optional add-on products that consumers did not agree to purchase.
- GAP products were allegedly financed on salvage vehicles, although there is an exclusion for salvage vehicles.
- Servicers allegedly imposed “onerous requirements” for canceling add-on products and failed to honor contractual cancellation rights.
- Refunds of unearned premiums for add-on products were allegedly not ensured upon early termination, and when provided, were often inaccurately calculated or delayed.
Furnishing Deficiencies:
- Auto lenders and servicers allegedly furnished inaccurate information to credit reporting companies, violating the FCRA.
- Auto furnishers allegedly significantly delayed correcting and updating inaccurate information.
The report also highlights recent enforcement actions and recent supervisory program developments, such as the issuance of BNPL Product FAQs and an advisory opinion on consumer protections for home sales financed under contracts for deeds.
