CFPB outlines auto lending violations

Consumers sometimes face inaccurate loan disclosures and are being charged for additional products without their consent, according to an Oct. 7 supervisory highlights report from the Consumer Financial Protection Bureau. 

Consumers sometimes face inaccurate loan disclosures and are being charged for additional products without their consent, according to an Oct. 7 supervisory highlights report from the Consumer Financial Protection Bureau. 

Lenders allegedly repossessed consumers’ vehicles even after the borrower made timely payments or secured loan extensions. Subprime auto finance companies charged consumers for optional, additional products without their consent, the bureau said. In other cases, servicers allegedly failed to give refunds or credits to consumers for an unused part of a product or required borrowers to make multiple in-person visits to cancel an unwanted add-on.

The bureau found that lenders knowingly placed inaccurate loan information on thousands of consumers’ credit reports. Erroneous information allegedly included past-due amounts for charged-off accounts, incorrect dates of when borrowers became behind on payments, and inaccurate actual payment amounts following a settlement or payoff. 

The CFPB fined Toyota Motor Credit $60 million after allegedly withholding refunds and harming borrower credit reports. The CFPB also took action against Wells Fargo for illegally assessing interest rate charges and fees on auto and mortgage loans. 

“In some cases, lenders were relying on inappropriate computer systems that were not designed to report information about auto loans,” according to the bureau. “In response to the findings, lenders are conducting reviews and correcting the furnished information for all affected consumers.” 

  • Borrowers paid erroneous late fees due to servicers misallocating auto loan payments, such as applying payments to late fees initially instead of the loan principal and interest. 
  • Lenders misled borrowers about their chances to qualify for a low interest loan, when the lowest rate offered more than doubled the advertised rate. The bureau ordered servicers to not use marketing materials deemed misleading.

“Borrowing to buy a vehicle is one of the largest sources of household debt for American families, and many deal with unnecessary costs and challenges paying for their car,” said CFPB Director Rohit Chopra. “The CFPB will take action against auto-finance companies that charge fees for nonexistent services, or repossess cars after borrowers make payments.”

Fredrikson & Byron Law