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  • FTC obtains $450,000 settlement with auto dealer over fraudulent consumer financial documents

    Federal Issues

    On July 29, the FTC announced a proposed settlement with the owner and manager of a group of auto dealers with locations in Arizona and New Mexico near the Navajo Nation’s border, resolving allegations that the individual defendant advertised misleading discounts and incentives and falsely inflated consumers’ income and down payment information on certain financing applications. As previously covered by InfoBytes, in 2018, the FTC filed an action against the defendants alleging violations of the FTC Act, TILA, and the Consumer Leasing Act (CLA) for submitting falsified consumer financing applications to make consumers appear more creditworthy, resulting in consumers—many of whom are members of the Navajo Nation—defaulting “at a higher rate than properly qualified buyers.” A settlement was reached with the auto dealer defendants last September (covered by InfoBytes here), which required, among other things, that the auto dealer defendants cease all business operations and pay a monetary judgment of over $7 million.

    If approved by the court, the proposed order would result in a $450,000 payment to the FTC, and would prohibit the individual defendant, who neither admits nor denies the allegations, from (i) misrepresenting information in any documents associated with a consumer’s purchase, financing, or leasing of a motor vehicle; (ii) misrepresenting the costs or any other material facts related to vehicle financing; or (iii) falsifying loan information. The individual defendant would also be required to provide consumers a reasonable opportunity and sufficient time to review documents associated with the vehicle financing, and is prohibited from violating the TILA and CLA.

    Federal Issues FTC Enforcement Auto Finance Consumer Finance FTC Act Consumer Leasing Act TILA

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  • FDIC updates Consumer Compliance Examination Manual

    Agency Rule-Making & Guidance

    On March 2, the FDIC announced updates to its Consumer Compliance Examination Manual (CEM). The CEM includes supervisory policies and examination procedures for FDIC examination staff evaluating financial institutions’ compliance with federal consumer protection laws and regulations. The recent updates include, among other things, changes to the sections and questions related to (i) fair lending laws and regulations and the Fair Lending Scope and Conclusions Memorandum; (ii) TILA and the Consumer Leasing Act; and (iii) the asset-based definitions for small, intermediate, and large institutions for the Community Reinvestment Act.

    Agency Rule-Making & Guidance FDIC Compliance Examination Fair Lending TILA Consumer Leasing Act CRA

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  • Agencies finalize certain 2021 thresholds

    Agency Rule-Making & Guidance

    On November 18, the CFPB, OCC, and the Federal Reserve Board announced a final rule, which increases the TILA smaller loan exemption threshold for the special appraisal requirements for higher-priced mortgage loans (HPMLs). TILA requires creditors to obtain a written appraisal before making a HPML unless the loan amount is at or below the threshold exemption. Each year the threshold must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The exemption threshold for 2021 is $27,200, which remains at the same level it was in 2020.

    Additionally, the CFPB and the Federal Reserve Board finalized the annual dollar threshold adjustments that govern the application of TILA (Regulation Z) and Consumer Leasing Act (Regulation M) (available here and here), as required by the Dodd-Frank Act. The exemption threshold for 2021, based on the annual percentage increase in the CPI-W, remains unchanged at $58,300 or less, except for private education loans and loans secured by real or personal property used or expected to be used as the principal dwelling of a consumer, which are subject to TILA regardless of the amount.

    The final rules take effect on January 1, 2021.

    Agency Rule-Making & Guidance CFPB OCC Federal Reserve Regulation Z Regulation M TILA Consumer Leasing Act Mortgages

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  • FTC settles with auto dealers for falsifying consumer financial documents

    Federal Issues

    On September 4, the FTC announced a settlement with group of auto dealers (defendants) with locations in Arizona and New Mexico near the Navajo Nation’s border, resolving allegations that the defendants advertised misleading discounts and incentives and falsely inflated consumers’ income and down payment information on certain financing applications. As previously covered by InfoBytes in August 2018, the FTC filed an action against the defendants alleging violations of the FTC Act, TILA, and the Consumer Leasing Act for submitting falsified consumer financing applications to make consumers appear more creditworthy, resulting in consumers—many of whom are members of the Navajo Nation—defaulting “at a higher rate than properly qualified buyers.”

    The court-approved settlement requires the defendants to cease all business operations and includes a monetary judgment of over $7 million. Because the defendants are currently in Chapter 7 bankruptcy proceedings, the settlement will make the FTC an unsecured claimant in the bankruptcy proceedings. The settlement also prohibits the bankruptcy trustee from using or selling the consumer information obtained from the defendants’ business activities as part of the bankruptcy liquidation.

    Federal Issues Consumer Finance FTC Auto Finance FTC Act TILA Consumer Leasing Act Bankruptcy

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  • FDIC updates Consumer Compliance Examination Manual

    Agency Rule-Making & Guidance

    On May 13, the FDIC announced the April updates to its Consumer Compliance Examination Manual (CEM). The CEM includes supervisory policies and examination procedures for FDIC examination staff for evaluating financial institutions’ compliance with federal consumer protection laws and regulations, and is designed to promote consistency and efficiency in the FDIC’s examination process. The recent updates include, among other things, (i) changes to the pre-examination planning process; (ii) incorporation of threshold changes for TILA, HMDA, and the Consumer Leasing Act; and (iii) changes to asset-based definitions for small and intermediate banks for the Community Reinvestment Act.

    Agency Rule-Making & Guidance FDIC Supervision Examination TILA HMDA Consumer Leasing Act CRA

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  • Agencies adjust threshold for Regulations Z and M

    Agency Rule-Making & Guidance

    On October 31, the CFPB and the Federal Reserve Board finalized the annual dollar threshold adjustments that govern the application of Regulation Z (Truth in Lending Act) and Regulation M (Consumer Leasing Act) to credit transactions, as required by the Dodd-Frank Act (published in the Federal Register here and here). Each year the thresholds must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The exemption threshold for 2020, based on the annual percentage increase in the CPI-W, is now $58,300 or less, except for private student loans and loans secured by real property, which are subject to TILA regardless of the amount.

    Agency Rule-Making & Guidance CFPB Federal Reserve Federal Register TILA Consumer Leasing Act Regulation M Regulation Z

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  • Agencies finalize new 2019 thresholds for TILA and CLA

    Agency Rule-Making & Guidance

    On November 21, the CFPB and the Federal Reserve Board finalized the annual dollar threshold adjustments that govern the application of Regulation Z (Truth in Lending Act) and Regulation M (Consumer Leasing Act) to credit transactions, as required by the Dodd-Frank Act. Each year the thresholds must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The exemption threshold for 2019, based on the annual percentage increase in the CPI-W, is now $57,200 or less, except for private student loans and loans secured by real property, which are subject to TILA regardless of the amount.

    Agency Rule-Making & Guidance CFPB Federal Reserve TILA Consumer Leasing Act

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  • FTC announces charges against auto dealerships for falsifying consumer information on auto financing documents

    Lending

    On August 1, the FTC announced charges against a group of four auto dealers (defendants) with locations in Arizona and New Mexico near the Navajo Nation’s border alleging, among other things, that the defendants advertised misleading discounts and incentives through their vehicle advertisements, and falsely inflated consumers’ income and down payment information on certain financing applications. The charges brought against the defendants allege violations of the FTC Act, the Truth in Lending Act, and the Consumer Leasing Act. According to the complaint, by allegedly falsifying the customers’ income and down payments, the defendants “inaccurately made consumers appear more creditworthy” on the false financing applications. Moreover, the FTC claims the defendants often prevented consumers from reviewing the falsified information provide in the financing applications prior to signing. As a result, credit was extended to consumers—many of whom are members of the Navajo Nation—who then subsequently “defaulted at a higher rate than properly qualified buyers.” Furthermore, the complaint asserts that the defendants’ deceptive advertising practices concealed the true nature and terms of the financing or leasing offers, and were in violation of federal law for failing to disclose the required terms. The complaint seeks, among other remedies, a permanent injunction to prevent future violations, restitution, and disgorgement.

    Lending Consumer Finance FTC Auto Finance FTC Act TILA Consumer Leasing Act

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  • Auto finance company agrees to $19.7 million preliminary class action settlement over extra lease fees

    Courts

    On June 15, the lead plaintiff filed a motion in the U.S. District for the Southern District of Florida for preliminary approval of an approximately $19.7 million class action settlement between a group of consumers and an auto finance company over allegations that extra fees were charged beyond the set purchase option price disclosed in certain vehicle lease contracts. According to the motion, the lead plaintiff alleged that after he chose to purchase his vehicle at the end of his lease term and he was charged extra third-party fees not included in his original lease contract. The class action complaint alleges violations of the Consumer Leasing Act and breach of contract. The settlement class consists of consumers nationwide who entered into certain lease contracts with the company, purchased their leased vehicle after June 4, 2009, and that were required to pay a documentary or dealer fee not disclosed in the lease contract, which allegedly averages about $238 per consumer. The settlement would allow prospective opt-in members to submit a claim for repayment of 100% of the extra fees charged. The $19.7 million settlement figure was determined using a statistically significant sample of the transactional records available and includes up to $2.95 million in attorneys costs and fees. The settlement is awaiting the court’s approval.

    Courts Class Action Auto Finance Consumer Leasing Act

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  • FTC reports on certain 2017 enforcement activities to the CFPB

    Federal Issues

    On May 17, in response to a request from the CFPB, the FTC transmitted a letter summarizing its 2017 enforcement activities related to Regulation Z (TILA), Regulation M (Consumer Leasing Act), and Regulation E (Electronic Fund Transfer Act) for the CFPB’s use in preparing its 2017 Annual Report to Congress. The FTC highlighted numerous activities related to the enforcement of the pertinent regulations, including:

    • Payday Lending. The FTC acknowledged the continued litigation against two Kansas-based operations and their owner for allegedly selling lists of counterfeit payday loan debt portfolios to debt collectors in violation of the FTC Act, previously covered by InfoBytes here.
    • Military Protection. The FTC identified the July 2017 military consumer financial workshop and the launch of the new Military Task Force (previously covered by InfoBytes here and here) among the activities the agency engaged in related to protecting the finances of current and former members of the military. The FTC also noted continued participation in the interagency group working with the Department of Defense on amendments to its rule implementing the Military Lending Act.
    • “Negative Option.” For actions under the Regulation E/EFTA, the FTC highlighted numerous “negative option” enforcement actions, in which the consumer agrees to receive goods or services from a company for a free trial option, but if the consumer does not cancel before the trial period ends, the consumer will incur recurring charges for continued goods or services. Among the actions highlighted is a case in which the FTC imposed a $179 million judgment (suspended upon the payment of $6.4 million) settling allegations that the online marketers’ offers of “free” and “risk free” monthly programs for certain weight loss and other products were deceptive.
    • Auto Loans. The letter highlighted, among others, the FTC action against a Southern California-based group of auto dealerships that allegedly violated a prior consent order with the FTC by misrepresenting the cost to finance or lease a vehicle, previously covered by InfoBytes here.

    Federal Issues FTC Act Payday Lending FTC Auto Finance Enforcement Military Lending Act Department of Defense CFPB TILA Consumer Leasing Act EFTA Congress

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