The Consumer Financial Protection Bureau settled with Lobel Financial Corporation over allegations of unfair practices in violation of the Consumer Financial Protection Act. The order requires Lobel to pay $1,345,224 in consumer redress to approximately 4,000 harmed consumers and a $100,000 civil money penalty.
An auto-loan servicer based in Anaheim, Calif., Lobel enrolled some of its customers in its Loss Damage Waiver product, charging a monthly premium of about $70. Under the product’s terms, Lobel said it would pay for the cost of covered repairs and, in the event of a total vehicle loss, cancel the borrower’s debt. Lobel allegedly continued to bill certain consumers for LDW coverage but then failed to provide it, and assessed fees from consumers that they were not obligated to pay, the bureau said.
Lobel’s LDW agreement, which all Lobel borrowers were required to sign, specified that if at any time the borrower failed to maintain car insurance subject to certain specifications, Lobel would add LDW coverage to the consumer’s account and impose a monthly charge. If a borrower became 10 or more days delinquent on an auto loan with LDW coverage, Lobel might stop LDW coverage.
The bureau’s investigation found that, since 2012, Lobel charged customers LDW premiums after they had become 10 days delinquent on their auto loans but did not provide them with LDW coverage. When these customers needed repairs or experienced total vehicle losses, Lobel denied their claims. This practice was unfair under the CFPA because consumers were charged for a service that they had not received, the agency said.
The CFPB also found that Lobel charged some customers LDW-related fees that Lobel had not disclosed in its LDW contract. This practice was also unfair under the CFPA.
The order also prohibits Lobel from failing to provide consumers with LDW coverage or similar products or services for which it has charged consumers or from charging consumers fees that are not authorized by its LDW contracts.