CFPB imposes fine for violating consent order

The bureau has entered into a consent order with auto lender Security National Automotive Company for insufficient progress in complying with an earlier consent order over its treatment of servicemembers who fell behind on loan payments.

In late April, the Consumer Financial Protection Bureau imposed a fine of more than $1 million on Security National Automotive Company, LLC (SNAAC), an auto lender.

The CFPB and SNAAC entered into a consent order a year ago pursuant to SNAAC’s debt collection practices, but the CFPB last month determined that insufficient progress had been made. The bureau and SNAAC have now entered into a new consent order to resolve the situation. This is the first ever CFPB penalty for noncompliance with a consent order.

The original consent order penalized SNAAC for engaging in unfair, deceptive, and abusive practices in violation of the federal Consumer Financial Protection Act while attempting to collect from servicemembers who fell behind on their loans. The 2015 order required SNAAC to pay a $1 million penalty, as well as $2.275 million in consumer redress. A separate court order enjoined SNAAC from using aggressive debt collection tactics.

Several months ago, the CFPB began reviewing SNAAC’s compliance with the 2015 order, acting in part on a tip from a servicemember’s father. SNAAC maintains that while it disagreed with the CFPB’s concerns, it offered to pay all the disputed amounts to move forward. According to SNAAC, the CFPB declined that offer and began an investigation that led to the new consent order.

Specifically, the CFPB alleges that SNAAC issued worthless “credits” to consumers who no longer owed money on their loans, and that SNAAC improperly categorized paid-in-full accounts as if they actually had a balance, thereby issuing “credits” to those consumers rather than refunds. Similarly, SNAAC issued “credits” to consumers whose debts had been discharged in bankruptcy.

In addition, the CFPB investigation revealed that SNAAC improperly credited consumers making payments under settlement agreements. The CFPB contends that in those cases, the auto lender based redress on the original, higher debt in place, essentially treating the borrowers as if they had never settled. The CFPB asserts that SNAAC in some instances avoided issuing a refund to those consumers, instead issuing “credits” that exceeded their settlement balances. Further, because their settlement balances were improperly credited, some consumers unknowingly overpaid SNAAC on their settlement agreements.

“This company violated abureau order when it failed to get money back to servicemembers it had hounded with illegal debt collection tactics,” said CFPB Director Richard Cordray. “We are making sure this company finally rights its wrongs.”

Fredrikson & Byron Law