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Financial Services Law Insights and Observations

CFPB settles with auto loan company over deceptive sales practices

Federal Issues CFPB Enforcement UDAAP Deceptive CFPA Auto Finance

Federal Issues

On November 20, the CFPB announced a settlement with a Florida-based nonbank and the nonbank’s founder (collectively, “defendants”), resolving allegations that the defendants violated the Consumer Financial Protection Act by making misleading statements in disclosures and advertisements for their auto loan payment accelerator program. According to the Bureau, the defendants’ program automatically deducts partial payments on a bi-weekly basis from consumers’ bank accounts and then forwards those payments every month to consumers’ lenders or servicers. As a result, enrolled consumers end up making the equivalent of 13 monthly payments each year instead of 12. While the program is marketed as an opportunity for consumers to save money, the Bureau claimed that the defendants misrepresented the amount consumers would save by not disclosing a $399 enrollment fee in the savings calculations presented to consumers. Due to the enrollment fee, the program’s costs “ordinarily exceed[ed] any savings,” the Bureau alleged, noting that the defendants had no basis for claiming that thousands of consumers saved money by enrolling in the program.

The consent order requires the defendants to pay a $1 civil money penalty and $9.3 million in consumer redress, which is suspended upon payment of $900,000 based on the defendants’ demonstrated inability to pay the full judgment. The Bureau noted in its press release that harmed consumers may be eligible to receive additional relief from the Bureau’s Civil Penalty Fund. The defendants are also prohibited from making any deceptive misrepresentations about the payment program or any other payment accelerator programs.

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