The Consumer Finance Protection Bureau (CFPB) says it’s taking action against improper automobile repossessions.
The regulator on Monday (Oct. 7) released findings in its investigation into illegal practices in the auto finance world, including lenders repossessing cars after they’ve made payments or gotten extensions on their loans.
“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,” CFPB Director Rohit Chopra said in a news release. “The CFPB will take action against auto-finance companies that charge fees for nonexistent services, or repossess cars after borrowers make payments.”
The bureau said it also found cases in which subprime lenders charged customers for optional add-on products — like extended warranties — that the buyers didn’t purchase. The CFPB said it has ordered these companies to cease this conduct and make it clear to customers that such products are optional.
In addition the CFPB found that some loan servicers were misallocating borrowers’ auto loan payments, applying payments as late fees first instead of applying them to the loan principal and interest, leading borrowers to pay erroneous late fees.
“As a result, CFPB examiners directed servicers to fully refund all accounts that incurred late fees due to payments being applied in a different order than that disclosed on the servicers’ website,” the release said.
The agency also said it has prohibited servicers from repossessing vehicles for consumers who have made timely payments or payment arrangements or have obtained a loan modification sufficient to prevent repossessions.
The announcement comes days after a Wall Street Journal (WJS) report that car companies are expecting slowing sales as consumers cut back. Some observers project that automakers will finish the year with U.S. vehicle sales of about 15.7 million, compared to the five years leading to the pandemic, when that figure came to at least 17 million.
“The question of what consumers will be able to afford moving forward is still up in the air, as noted here … when The Conference Board released its monthly consumer confidence index data,” PYMNTS wrote. “While it showed a steep decline in consumer confidence, the data also showed a slight improvement in plans for major purchases, such as homes or new cars.”
The post CFPB Targets Wrongful Car Repossessions and Service Fees appeared first on PYMNTS.com.
