Auto financing practices under scrutiny in CFPB’s latest supervisory report

In its recently released Supervisory report, the Consumer Financial Protection Bureau highlights unfair (and abusive) acts and practices in auto financing.

In this sector, the CFPB says its Supervision pays particular attention to auto repossessions, where it found numerous unfair acts and practices. Among them, the bureau found that a servicer or servicers erroneously repossessed consumers’ vehicles by failing to cancel orders to repossess vehicles when consumers had made payments or obtained extensions that should have prevented repossessions. Servicers also wrongly repossessed vehicles when consumers requested, or the servicers had approved loan deferments or loan modifications. The bureau examiners also found that servicers wrongfully failed to record liens on vehicles and then repossessed vehicles without valid liens.

The bureau also identified deceptive advertising by ‘subprime auto loan originators,’ who marketed annual percentage rates (APRs) for car loans in a way that misled consumers who received pre-screened ads. The APRs actually charged were sometimes twice as high as the advertised rate, the bureau report said.

Finally, the bureau identified abusive practices with loan servicers’ practices related to add-on products on car purchases. For example, bureau examiners “found that subprime auto-finance companies engaged in abusive acts or practices when they collected and retained amounts for optional add-on products that consumers did not agree to purchase.”

Read more about these and other findings in the bureau report.