InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
CFPB distributes nearly $6 million in relief payment to veterans harmed by bad-faith lenders
On January 2, the CFPB reported it had sent nearly $6 million to consumers harmed by illegal lending practices that specifically targeted veterans. Between 2019 and 2020, the CFPB filed four suits against several loan brokers, which InfoBytes previously covered. In 2019, the CFPB entered into a settlement with an online loan broker that promised to connect veterans with companies offering high-interest loans in exchange for the assignment of some or all of their military pension payments. Again in 2019, InfoBytes covered another settlement between the CFPB and a pension-advance broker for allegedly misrepresenting the contracts offered to veterans and other consumers between 2011 and 2016. In 2020, the CFPB entered into a settlement with and a loan broker who offered high-interest loans to veterans in exchange for assignment of some of their monthly pension or disability payments. Lastly, and again in 2020, InfoBytes covered a complaint brought by the South Carolina Department of Consumer Affairs against a pension-advance scheme in violation of the CFPA for brokering contracts offering high-interest credit to disabled veterans and other consumers in exchange for the assignment of some of the consumers’ unpaid earnings, monthly pensions, or disability payments.
The recent payments totaled $5.1 million from the CFPB’s victims’ relief fund and over $720,000 from money paid by the defendants. The CFPB sent checks in December to certain customers, but an individual who believes they are eligible can submit a claim for a refund.
NYDFS: Auto loan borrowers are entitled to rebates for cancelled ancillary products
On July 18, NYDFS sent a letter reminding regulated auto lenders and auto loan servicers that they are responsible for ensuring certain rebates are credited to consumers whose vehicles were repossessed or were a total loss. During its examinations, NYDFS identified instances where certain institutions that finance ancillary products, such as extended warranties, vehicle service contracts, and guaranteed asset protection insurance, failed to properly calculate, obtain, and credit rebates to consumers as required. NYDFS explained that the terms of sale for such ancillary products “provide that if the vehicle is repossessed or is a total loss prior to the product’s expiration, the consumer is entitled to a rebate for the prorated, unused value of the product (a ‘Rebate’), payable first to the [i]nstitution to cover any deficiency balance, and then to the consumer.” NYDFS found that some institutions either neglected to pursue Rebates from the issuers of the ancillary products or miscalculated the owed amounts, adding that in some instances, institutions made initial requests for Rebates but did not follow through to ensure that they were received and credited to consumers.
NYDFS explained that an institution’s failure to obtain and credit Rebates from unexpired ancillary products is considered to be unfair “because it causes or is likely to cause substantial injury to consumers who are made to pay or defend themselves against deficiency balances in excess of what the consumer legally owes.” The resulting injury caused to consumers is not outweighed by any countervailing benefits to consumers or to competition, NYDFS stressed.
Additionally, NYDFS said an institution’s statements and claims of consumers’ deficiency balances that do not include correctly calculated and applied Rebates are considered to be deceptive, as they mislead consumers about the amount they owe after considering all setoffs. NYDFS said it expects institutions to fulfill their contractual obligations by ensuring Rebates are properly accounted for, either by deducting them from deficiency balances or issuing refund checks if no deficiency balance is owed.
NYDFS further noted in its announcement that recent CFPB examinations found that certain auto loan servicers engaged in deceptive practices when they notified consumers of deficiency balances that misrepresented the inclusion of credits or rebates. The Bureau’s supervisory highlights from Winter 2019, Summer 2021, and Spring 2022 also revealed that collecting or attempting to collect miscalculated deficiency balances that failed to account for a lender’s entitled pro-rata refund constituted an unfair practice.
CFPB takes action against Maryland debt collectors
On August 16, the CFPB entered into a preliminary settlement with a debt collection entity, its subsidiaries, and their owner (collectively, “defendants”) for allegedly violating the FCRA, FDCPA, and the CFPA, resolving a case filed in the U.S. District Court for the District of Maryland. As previously covered by InfoBytes, the complaint alleges that the defendants violated the FCRA and its implementing Regulation V by, among other things, failing to (i) establish or implement reasonable written policies and procedures to ensure accurate reporting to consumer-reporting agencies; (ii) incorporate appropriate guidelines for the handling of indirect disputes in its policies and procedures; (iii) conduct reasonable investigations and review relevant information when handling indirect disputes; and (iv) furnish information about accounts after receiving identity theft reports about such accounts without conducting an investigation into the accuracy of the information. The Bureau separately alleges that the violations of the FCRA and Regulation V constitute violations of the CFPA. Additionally, the Bureau alleges that the defendants violated the FDCPA by attempting to collect on debts without a reasonable basis to believe that consumers owed those debts. Under the terms of the proposed stipulated final judgment and order, the defendants are required to, among other things: (i) establish, modify, update, and implement policies and procedures on the accuracy of information furnished to consumer reporting agencies; (ii) establish internal controls to identify activities that may compromise the accuracy or integrity of information; (iii) establish an identity theft report review program; and (iv) retain an independent consultant to review the defendant’s furnishing of consumer information and debt collection activities in addition to provide recommendations. The proposed order also imposes a civil money penalty of $850,000.