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WBK Industry News - Federal Regulatory Developments

Servicemember Auto Lender Violates CFPB Consent Order, Fined $1.25 Million

The Consumer Financial Protection Bureau (“CFPB” or “Bureau”) has fined an auto-finance company (the “Company”) $1.25 million for allegedly failing to abide by the terms of a 2015 consent order, which required $2.275 million in consumer redress and the submission of a redress plan consistent with the 2015 order.

In 2015, the Bureau issued a consent order alleging that the Company, which specializes in lending to members of the United States military, engaged in unfair, deceptive, and abusive acts and practices in violation of the Consumer Financial Protection Act of 2010.  The violations included exaggerating the potential disciplinary action service members would face for delinquency, threatening to contact commanding officers to pressure service members into repayment, and falsely threatening to garnish wages.

Following the 2015 consent order, the Bureau was alerted to the possibility that the Company was not following its terms.  After investigating a tip from the father of a service member affected by the Company’s earlier practices, the CFPB alleged the Company failed to abide by the 2015 order.

The Bureau’s recent consent order, issued in April 2017, alleges that the Company avoided paying nearly half the redress required under the 2015 order.  The Company allegedly issued worthless “credits” to consumers who had settled or discharged accounts instead of cash refunds, preventing consumers from actually being able to use the money to which they were entitled.  Additionally, the Company issued credits to consumers who had entered into agreements to settle accounts, but had not yet completed the settlement, resulting in overpayment to the Company.

The Bureau also alleges that the Company’s redress plan was inconsistent with the terms of the 2015 consent order and was designed to underpay consumers.

As part of the April 2017 consent order, the company must pay a judgment of approximately $1.2 million in equitable monetary relief; submit a new, comprehensive written redress plan; and pay a civil money penalty of $1.25 million to the CFPB.

A copy of the April 2017 consent order may be found here.