A&B Summary: The Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) recently issued a bulletin addressing vehicle repossession and alerting market participants to what it considers to be legal obligations of such market participants under federal law governing unfair, deceptive or abusive practices. acts or practices (“UDAAP”). On the same day, the CFPB also issued an inflammatory press release, claiming that creditors were engaging in activities causing consumers to “wake up to see their cars stolen”. Shortly thereafter, a number of Republican congressmen responded to the bulletin and press release with a letter expressing concern that the Bureau’s message mischaracterized the activities of auto finance companies. The letter requested information and data supporting the CFPB’s assertions that the issues identified are occurring in the current market.
On February 28, 2022, the CFPB published a compliance bulletin and issued a Press release express concerns about certain automatic repossession activities. While the bulletin was generally neutral in tone, the press release accused creditors and repairers of stealing consumers’ vehicles. Interestingly, the Bulletin and press release also erroneously stated that the collection of personal property storage fees by repossession agents was “unlawful”. While the CFPB has certainly taken the position that this constitutes an unfair practice under its UDAAP authority, the charging of such fees and the amounts authorized to be charged are expressly permitted under applicable state law where such activities have historically taken place.
Regardless of what one might think of repossessions, references in both documents to various publications and findings dating back to 2016 provide insight into how the Bureau has approached repossession investigations and reviews in the past, which is useful for the industry to take into account. The CFPB begins the Bulletin by noting the “extremely strong demand” and rising prices for used automobiles. The Bureau then fears that these market conditions create incentives for riskier auto repossession practices that could violate the law. By way of example, the Bulletin discusses findings from past reviews and enforcement actions – and one might suggest they are a bit dated – where maintenance workers allegedly acted improperly.
The types of activity identified by the CFPB, in both the bulletin and the press release, as problematic were characterized as illegal seizure of cars, sloppy record keeping, unreliable balance inquiries and “redemption”. » a consumer’s personal property that was in the vehicle at the time of purchase. repossession. The conduct cited by the CPFB as inappropriate includes the charging of pre- and post-repossession fees, and specifically the collection of allegedly “illegal” personal property storage fees demanded by repossession agents before they are return these personal assets to the borrower. It should be noted that this allegedly “unlawful” conduct is expressly permitted by the laws of many states, although the amount that can be charged is generally limited by those same laws. The Bureau also raised the issue of repossession of vehicles despite the presence of a stay of bankruptcy and misrepresentation of the amount owed by the borrower resulting in underpayment and subsequent repossession.
In addressing issues of sloppy record keeping uncovered during reviews, the Bulletin focused on duty officers who incorrectly coded consumers as offenders resulting in improper foreclosures, referring to some highlights of the 2017 oversight and 2018 – items published about 5 and 4 years ago respectively. In other cases cited in the Bulletin, repairers allegedly failed to cancel repossession orders for consumers who made payments to update their account, and repossession agents did not confirm that a repossession order was still active before repossessing a vehicle. Finally, the CFPB noted that it had found instances where a borrower’s payments were not applied to outstanding debt in the manner represented to consumers by managers, resulting in some borrowers being considered to be even more overdue.
To avoid UDAAP violations, the Bulletin suggests that market participants should (1) review their policies regarding repossession, (2) promptly communicate with repossession service providers when a repossession is canceled and monitor compliance with such orders, (3) exercise routine oversight by monitoring improper repossessions and audit portfolios, and (4) act promptly to correct any improper repossessions and reimburse consumers for the associated costs. The Bulletin also recommends that entities ensure that consumers are not charged for unnecessarily coerced insurance.
Response from Congressional Republicans:
On March 10, 2022, eleven Republican members of the House Financial Services Committee sent a letter to CFPB Director Rohit Chopra expressing concern over the inflammatory comments made in the press release and the dated nature of the information in the bulletin. The letter begins by questioning the CFPB’s rhetoric, stating that it was a “gross error” on the Bureau’s part to equate repossessing a vehicle with theft. Next, the Letter points out that “there are more than 2.2 million car seizures” per year in the United States, and argues that the examples raised by the CFPB were not representative of the whole of the world. industry. Next, the letter asked the Bureau to provide data to support the claim that “high car prices increase the risk of improper repossession by lenders, repairers and investors.” Finally, members of Congress have touted the critical role auto finance companies play in helping Americans get to or complete jobs.
The publication of such a bulletin, and even the press release itself, suggests that the CFPB will carefully consider repossession activities in future reviews. These documents further suggest the potential for future enforcement action where repairers have failed to meet the standards expected of them by the CFPB. Auto loan services should review their policies and procedures to ensure that repossession practices comply with all applicable laws and that procedures are in place to identify and prevent wrongful repossessions.