CFPB: Auto Loan Servicers Must Guarantee Legal Repossessions | Sheppard Mullin Richter & Hampton LLP
On February 28, the CFPB issued Bulletin 2022-4 regarding vehicle repossession and the potential violation of the Dodd-Frank Act prohibition on engaging in unfair, deceptive, or abusive acts or practices (UDAAP ) when repossessing vehicles. The CFPB is committed to using all appropriate tools to hold auto lenders and repairers accountable if they engage in UDAAPs related to their activities. Based on recent reviews and enforcement actions, the CFPB has observed the following activities in the auto finance industry: illegal seizure of cars, sloppy record keeping, unreliable balance demands, and ransom for personal property.
To avoid UDAAPs, the CFPB notes that entities should, among other things, consider doing the following:
- Review policies and procedures, including call scripts, to ensure they provide employees with accurate information about steps consumers can take to prevent repossession;
- Monitor repossession service providers for compliance with repossession cancellations;
- Review consumer contracts to validate that all fees charged to consumers are authorized under the terms of the applicable contracts; and
- Conduct regular reviews of service providers, including repossession providers, as to their relevant practices.
Put into practice : This bulletin represents the latest in a series of public warnings from the CFPB that it is closely monitoring the conduct of the automotive industry, particularly with respect to guaranteed credit, maintenance and affordable recovery and fair competition (we recently discussed the CFPB’s latest look at auto finance businesses in a previous Consumer Finance and FinTech blog post here). Auto finance companies should heed these warnings and consider taking steps to implement some of the best practices described in this bulletin before they are subject to supervisory review or enforcement action.