The Consumer Financial Protection Bureau this week released a new Supervisory Highlights Special Edition focused on its findings in automotive financing.
The CFPB release mentions add-on products, payments being misapplied and vehicles being wrongly repossessed, lenders placing inaccurate loan information on credit reports.
“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.”
The CFPB detailed findings that subprime auto finance companies had charged customers for optional add-on products that the customer did not agree to buy. It also found servicers had failed to refund consumers for the unused portion of the add-on product after the early termination of the loan or made them visit the dealership multiple times to cancel the add-on.
The CFPB directed the companies to stop the activity and make it clear to customers that add-on products were optional.
The CFPB noted servicers repossessing vehicles after failing to cancel orders when consumers had made payments or obtained a deferment or extension. Servicers were also misallocating consumers’ payments leading to additional late fees.
The CFPB stated lenders were misleading borrowers by advertising low interest rates when the lowest rate was more than double the advertised rate.
The CFPB also found lenders were knowingly placing inaccurate loan information on the credit reports of consumers, harming their credit. The inaccuracies included charge-off and settlement amounts. The CFPB fined Toyota Motor Credit $60 million for withholding refunds and harming borrowers’ credit reports.
