The CFPB recently issued a consent order against an auto-loan finance company for illegally charging customers interest on late payments of its loss damage waiver fee without their knowledge. The CFPB found that between 2016 and 2021, the company violated the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(c), 5536(a) through their engagement in unfair acts or practices.
The company, which services subprime auto loans that were originated by car dealers and later assigned to the auto finance group, required its customers to agree that if they had insufficient insurance coverage for their cars, the company would add “loss-damage-waiver” coverage to their accounts. This coverage, for a monthly fee, would cover cancellation of the customer’s debt in the event of a total vehicle loss or the cost of a repair.
The order requires the company to provide $565,813 in consumer relief to the over 5,000 harmed costumers, correct harmed costumers’ credit records, and pay a $50,000 civil penalty. The order also prohibits the company from charging interest on late payments without disclosing costs, and imposes compliance reporting and recordkeeping requirements
The company did not admit or deny any findings of fact or conclusions of law, except as to jurisdiction.