Payday, auto and medical loan collectors have engaged in numerous unfair, deceptive and abusive practices during a recent eight-month stretch, according to a Consumer Financial Protection Bureau supervisory highlights report released July 26.
Payday lenders placed language in loan agreements that banned customers from revoking their consent for the lender to email, call or text them to collect on an outstanding balance, according to the report, which tracked findings from CFPB supervisory examinations from July 2022 to March 2023.
“Lenders also made false collection threats that would often purport their authority to garnish wages of borrowers, when no such authority exists,” the agency stated. “In some cases, the lender would actually make an unauthorized wage deduction by sending demand notices to consumers’ employers that incorrectly conveyed that the employer was required to remit to the lenders from the consumer’s wages the full amount of the consumer’s loan balance. In fact, the consumer had agreed to permit the lenders only to seek a wage deduction in the amount of the individual scheduled payment due.”
Auto lenders reportedly originated loan balances greater than the value of the car being purchased and adopted illegal collection practices while servicing the loans, according to the CFPB. Servicers have allegedly canceled automatic payments without providing sufficient notice, forcing customers to incur late fees.
“CFPB examiners found that consumers were misled in marketing materials by auto lenders about the quality of the car they were eligible for under the terms of an auto loan offer,” the CFPB stated. “The pictured cars were often significantly larger, more expensive, and newer than the advertised loan offers were good for.”
According to the agency, medical debt collectors violated the Fair Debt Collections Practices Act by trying to collect work-related medical debt after learning that doing so was illegal under state worker’s compensation law. The finding came after a CFPB report in May found that financial institutions were issuing medical installment loans and credit cards to patients with exorbitant interest rates of up to 27 percent.
“Today’s report furthers our efforts to highlight conduct that violates federal law, including the prohibition on abusive practices in consumer financial services,” said CFPB Director Rohit Chopra. “The CFPB is also inspecting more financial data brokers engaged in consumer reporting, as well as nonbank entities using authorities that previously went unused.”