RSSThe Consumer Financial Protection Bureau has issued a consent order against 3rd Generation, Inc., for illegally charging interest for late payment on its Loss Damage Waiver product without its customers’ knowledge.
The consent order requires the company, which does business as California Auto Finance, to refund or credit customers harmed by the conduct, furnish corrected information to credit reporting agencies, and pay a civil penalty. It also prohibits the company from charging interest on late payments without disclosing costs.
California Auto, which services subprime auto loans in California, required its customers to agree that if they had insufficient insurance coverage for their automobiles, they would add “loss-damage-waiver” coverage to their accounts, according to the complaint.
The CFPB found that California Auto engaged in unfair practices against their customers in violation of the Consumer Financial Protection Act of 2010. When a customer’s LDW payment was late, California Auto would charge interest on the late payment, but it did not disclose this interest to the customer, the bureau said. Between 2016 and 2021, California Auto charged about 5,800 customer accounts a total of $565,813 in interest on late payments of loss-damage-waiver fees without disclosing the charges.
California Auto will provide consumer relief to those customers, including refunds and account credits, and it will correct certain consumers’ credit records. It will also pay a $50,000 penalty to be deposited in the CFPB’s Civil Penalty Fund.
“Buying a car is among the biggest purchases many people ever make, and the CFPB will not tolerate illegal financing practices that increase the amount people have to pay,” said CFPB Acting Director David Uejio. “This case presents another example of auto loan companies unfairly or deceptively using add-on products to increase the cost of auto loans.”
