CFPB Takes Action Against Wrongful Auto Repossessions and Loan Servicing Breakdowns
Consumers given inaccurate loan disclosures and charged for add-on products without consent
WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) published a new edition of Supervisory Highlights describing the agency’s supervisory findings related to illegal practices in auto finance, including lenders repossessing consumers’ cars after the borrower made timely payments or received loan extensions. Other illegal conduct detailed in the report includes lenders providing inaccurate disclosures, misapplying loan payments, and putting incorrect information on consumers’ credit reports. The report also highlights significant problems with add-on products that are packaged at the front-end of the auto loan, increasing the loan costs, and then not properly refunded at the back end upon early loan termination, when the consumer can no longer use the products.
“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.”
Consumers Encountered Difficulties with Add-On Products
Car purchasers are frequently offered add-on products, such as extended warranties or “guaranteed asset protection” insurance, and sellers charge the borrower an upfront lump sum cost at the loan origination that is bundled into the total loan cost. If a borrower pays off the loan balance early, or otherwise terminates the loan, they are generally eligible for a prorated refund of the prepaid premiums for the unused portion of the loan term.