CFPB Eyes Unfair, deceptive acts: Here are some tips to avoid control | McGlinchey Stafford

Auto Finance Excellence – April 5, 2022

With a new administration come new priorities for federal services, and Office of Financial Consumer Protection (CFPB) is no different. During the Trump administration, the Bureau focused on “educating” consumers. Under President Biden, the CFPB has signaled, in words and deeds, a return to significantly more aggressive surveillance and enforcement actions.

In recent weeks, and due to the current economic climate, the CFPB has indicated that this new approach will focus in part on the car lending and car service sectors. Like many other goods and services, the price of vehicles has skyrocketed, leading many consumers to borrow more money to finance the purchase of a vehicle. Last year, figures from the Consumer Price Index show that the price of used vehicles has risen by an incredible 40%, with minimal signs of decline.

The CFPB recently released two newsletters highlighting its concerns about business practices in the auto finance and service industries as a result of inflation and the potential for rising vehicle prices to exacerbate risky recovery practices.

The CFPB closely monitors a number of fraudulent and misleading acts or practices (UDAAP) that car finance and servicing companies should be aware of, particularly in the use of technology and in the context of recovery.

Ensure UDAAP compliance

The Bureau’s actions demonstrate a clear intention to prioritize the investigation and prosecution of car finance and service companies for UDAAP breaches in the age of inflation. To avoid being subject to enforcement or to ensure a smooth oversight and review process, here are some considerations, including some highlighted by the Bureau, to ensure your company complies with UDAAP:

  • Make sure that if you use the latest technology to service car loans, your policies and procedures explain the rationale for the technology and identify any benefits that the technology provides to consumers.
  • Check policies and procedures, including call scenarios, and any written statements on your company website (or elsewhere) for details on what steps a customer can take to avoid retrieval.
  • Make sure you have adequate policies and procedures for canceling recovery orders. This includes: (a) ensuring that cancellations are made in a timely manner. (b) that the cancellation is notified promptly to sellers and recovery agents; (c) that there is a third party compliance monitoring system with cancellation orders; consumer compensation as required for unfair recoveries.
  • Check payment sharing policies and procedures and make sure they are consistent with the order outlined in consumer contracts and other consumer notifications. Likewise, check and watch for all fees charged before and after recovery and make sure there is a good faith basis for the charge and / or that the charge is expressly permitted by the applicable contract.
  • Examine consumer complaints about recovery and make sure there is a proper channel for receiving, investigating, and properly resolving consumer complaints related to illegal recovery and illegal post-recovery fees.
  • Carry out regular reviews of service providers, including retrieval providers, regarding their practices.
  • Monitor any FPI program to ensure that consumers are not charged for unnecessary FPI. This may include checking FPI cancellation rates.

This article is the first of a series of two parts. The second dose describes the CFPB’s particular focus on the use of technology and consumer privacy issues, as well as on car financing practices in the context of recovery.


This article was first published in Auto Finance Excellence, a sister service to Auto Finance News. McGlinchey is pleased to serve as the official Auto Finance Excellence compliance partner, providing knowledge and leadership through webinars, podcasts and monthly columns.

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