CFPB Uncovers Illegal Junk Fees on Bank Accounts, Mortgages, and Student and Auto Loans
Many companies are updating practices and making consumers whole based on supervisory findings
WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) released a special edition of its Supervisory Highlights that reports on unlawful junk fees uncovered in deposit accounts and in multiple loan servicing markets, including in mortgage, student, and payday lending. These unlawful fees corrode family finances, force up families’ banking and borrowing costs, and are not easily avoided – even by financially savvy consumers. As described in the Supervisory Highlights, the CFPB continues rooting unlawful fees out of consumer financial markets.
This Supervisory Highlights special edition covers unlawful junk fees in the areas of bank account deposits, auto loan servicing, mortgage loan servicing, payday lending, and student loan servicing found during examinations between July 1, 2022, and February 1, 2023.
Auto Loan Servicing
Last year, the CFPB issued compliance guidance to the auto loan servicing industry in response to identified practices that included the illegal seizure of cars, sloppy record keeping, unreliable balance statements, and ransom for personal property contained within repossessed vehicles.
In the last six months, CFPB examiners found illegal servicing practices, particularly around the charging of unlawful fees, including hitting car owners with:
Out-of-bounds and fake late fees: Servicers charged late fees that exceeded the permissible amounts stated in borrowers’ contracts. Servicers also charged late fees to consumers whose cars had been repossessed and their loans accelerated, which means that no payment was due that could have been subject to a late fee.
Inflated estimated repossession fees: Servicers, before returning vehicles to some consumers, charged inflated estimated repossession fees of $1,000. The average cost to repossess a vehicle is $350.
Pay-to-pay payment fees and kickback payments: After borrowers were locked into servicer relationships, some auto loan servicers charged payment processing fees for the most common payment methods that far exceeded servicers’ costs for processing payments. Payment processors collected the inflated fees, and the servicers then profited through kickbacks from the processors.
February 2023: Government Affairs Update
Click here to review the NIADA Government Affairs Report – February 2023 from Brett Scott
2022 Legislative Session Recap Report:
FROM: Colorado Division of Motor Vehicles
DATE: August 25, 2022
Colorado Auto Dealers:
Effective immediately and in accordance with Senate Bill 22-108 and section 7 of House Bill 22-1388, weight slip validations for trucks weighing more than 4,500 pounds but less than 10,000 pounds are allowed to be accepted as documentation.
Moving forward the state will accept the following documents:
- Colorado state titles,
- out-of-state titles,
- Manufacturer’s Statement of Origin (MSOs) and
- Vintelligence listing an accurate weight.
A weight slip will still be required for trucks that have been modified over 300 pounds. County staff will ask if the vehicle has been modified and by how many pounds to determine if the vehicle needs a certified weight slip. For vehicles modified over 300 pounds, MSOs, titles or Vintelligence information will not be accepted.
If you have any questions regarding this matter, please contact Jim.email@example.com.
July 2022: Government Affairs Update
June 2022: Government Affairs Update
May 24, 2022: CFPB fair lending activities during 2021
The CFPB recently released the report linked here outlining the agency focus on fair-lending actions across multiple industries. Please see below a quick recap of what the report entails. If you would like to read in more detail feel free to do so with the attached.
This report covers the Consumer Financial Protection Bureau’s (CFPB) fair lending activities during 2021. Much of the CFPB’s 2021 work centered on Acting Director Uejio’s call for the CFPB to take bold and swift action to address issues of pervasive racial injustice and long-term economic impacts of the COVID-19 pandemic on individuals and communities. In addition, Director Chopra has prioritized the CFPB’s foundations of financial inclusion, racial and economic equity, and fair competition. As a result, CFPB focused fair lending work on issues especially pertinent to people and communities of color and those at risk of losing their housing or unable to access credit for their small businesses.
Lastly, CFPB enforced action against Trustmark National Bank (Trustmark) for redlining in the Memphis Metropolitan Statistical Area (MSA). Trustmark discouraged prospective applicants in Black and Hispanic neighborhoods, avoided locating branches or assigning loan officers to these communities, and failed to monitor its fair lending compliance. CFPB will continue to examine and investigate entities who are engaged in redlining, as well as mortgage pricing discrimination.
May 24, 2022: FTC Commissioners Confirmation
With the recent confirmation of the final FTC Commissioners, the US Chamber recently wrote up an article outlining what to expect now that all open slots have been filled. The read is relatively quick and does provide some insight into what can be expected and how current staff are currently handling the new leadership. See below URL for full details.
May 24, 2022: Government Affairs Update
NIADA led a partnership of automotive and transportation industry associations in drafting a letter to Congress strongly supporting H.R. 6394, the Preventing Auto Recycling Theft (PART) Act, a bill designed to address the growing national problem of catalytic converter theft.
NADA, American Truck Dealers and the National RV Dealers Association were also among the 13 organizations that signed the letter, which was sent to House Energy and Commerce Committee chairman Rep. Frank Pallone (D-N.J.) and the committee’s ranking Republican, Rep. Cathy McMorris Rodgers (R-Wash.).
“Congress must pass H.R. 6394,” NIADA CEO Robert Voltmann said. “It is a critical piece of legislation to combat catalytic converter theft.”
The bill, introduced by Rep. Jim Baird (R-Ind.), would require new vehicles’ catalytic converters to be stamped with ID numbers, as well as creating a grant program to stamp VINs on the catalytic converters of existing vehicles and making the theft, sale, trafficking or known purchase of a stolen catalytic converter a federal crime punishable by up to five years in prison.
The bill follows the lead of new laws in 10 states designed to deter catalytic converter theft, but the letter says “a federal framework is needed … because this crime frequently involves trafficking stolen parts across state lines.”
The letter urges committee leaders “to support and hold a hearing on this bipartisan legislation.”
Department of Justice: While DOJ has long held that the protections of the Americans with Disabilities Act applies to websites as well as physical facilities, it has never issued a rule spelling out exactly what makes a website compliant – or non-compliant.
DOJ recently attempted to address that uncertainty with new guidance aimed at clarifying who is covered by the ADA and what it means for a website to be in compliance.
The guidance affirms that any business open to the public – even if it does not have a physical location – is considered a “public accommodation” that must make its site accessible to people with disabilities in accordance with the ADA.
It also listed a number of accessibility barriers that would cause a website to violate the law. They include:
- Poor color contrast.
- Use of color alone to give information.
- Lack of text alternatives on images.
- No captions on videos.
- Inaccessible online forms.
- Lack of keyboard navigation.
Still, the guidance left a bit of ambiguity, saying businesses have “flexibility in how they comply with the ADA’s general requirements” – but it did not explain what that flexibility entails.
The full guidance is available at beta.ada.gov/web-guidance.
Consumer Financial Protection Bureau: The CFPB announced it is invoking a largely unused legal provision to examine nonbank financial companies the bureau believes can pose risks to consumers.
The bureau said the Dodd-Frank Act allows it to review the books and records of nonbanks whose activities provide “reasonable cause” for the CFPB to “determine risks.”
Using that “dormant authority,” the bureau said, will “level the playing field” between banks and nonbanks.
“Risky conduct” includes potentially unfair, deceptive or abusive acts or practices, or other acts or practices that potentially violate federal consumer financial law. Reasonable cause can be determined by complaints collected by the CFPB, judicial opinions, administrative decisions, whistleblower complaints, state or federal partners, or news reports.
The annual PAC Cup competition officially kicks off for 2022 with a reception during the NIADA Convention and Expo, coming up June 20-23 at the MGM Grand in Las Vegas.
The reception will be held at 4 p.m. Wednesday, June 22. Attendees are asked to make a $150 contribution to the NIADA PAC Fund. Contributions can be made online at www.niada.com/pac.
The PAC Cup is friendly fundraising competition between NIADA’s four geographical regions. The Cup is awarded each year to the region that contributes the most to the PAC Fund between the NIADA Convention and the National Policy Conference in Washington D.C., which this year will be held Sept. 19-21.
The Cup, which will be on display at the reception, is currently held by Region II – the Southeast – which edged two-time defending champion Region III in the most recent competition.
In its seven-year history, the competition has raised nearly $800,000 for the PAC Fund, which helps NIADA support candidates for office who will work to protect the interests of independent dealers, the used vehicle industry and small business.
Texas: Leaders of Texas IADA got some quality time with state representatives last month.
TIADA president Mark Jones of MCMC Auto, vice president Greg Reine of Auto Liquidators and executive director Jeff Martin attended an event in Alvarado, Texas in support of state Rep. DeWayne Burns and got a bonus when Texas House Speaker Rep. Dade Phelan dropped by as well.
The dealers were able to engage with the legislators to discuss issues that affect their businesses and operations.
May 6, 2022
CFPB Supervisory Report Finds Unlawful Auto Repossessions, Breakdowns in Credit Report Disputes
All: please find attached some key highlights from the recent CFPB Report. Christina provided a great break down of what the report highlights below. Please reach out to either one of us with questions
Overview from Report:
- Servicers (dealers etc) engaged in unfair act or practices when they repossessed vehicles after consumers took action that should have prevented the repossession
- Caused substantial injury by depriving borrowers of the use of their vehicles (missed work, expenses for alternative transportation, repossession-related fees, detrimental credit reporting, and vehicle damage during repossession)
- Injury was not avoidable as consumers had taken action they believed would halt repossession
- In response, servicers are enhancing procedures (including timely communications with repossession agents and remediating consumers)
2.1.2 Misleading consumers about the final loan payment amount after deferral
- Servicers engaged in deceptive acts or practices when they misled consumers about the final loan payment after a deferral (deferrals frequently increase the consumer’s final payment amount)
- Servicers sent consumers notices about their final payments amounts that included imprecise conditional statements (the final payment “may be larger”)
- Conditional statements likely misled consumers to believe that the payment would only increase somewhat
- In response, servicers updates disclosure language and practices
2.1.3 Overcharging for add-on products
- Servicers engaged in unfair practices by failing to request refunds from the third-party administrators for “unearned” fees related to GAP products and failing to apply applicable refunds to the accounts after repossession and cancellation of the contracts
- At that point, the consumers did not have the vehicle that had been subject to the GAP product, and the product no longer offered any possible benefit to consumers
- The servicers’ failure to apply for the GAP product refunds from the third-pretty administrators resulted in inaccurate deficiency balances
- Servicers sent deficiency notices to consumers and reported balances to third-party debt buyers that included these inaccurate amounts as the deficiency balance owed by consumers
- Including these amounts in the deficiency balances resulted in substantial injury to consumers (the amounts to be collected were higher than the true amount owed)
- In response, servicers remediated impacted consumers and implemented additional controls to ensure the servicers process add-on products refunds after repossession
FOR IMMEDIATE RELEASE:
May 2, 2022
Office of Public Affairs
CFPB Supervisory Report Finds Unlawful Auto Repossessions, Breakdowns in Credit Report Disputes
Agency examiners identify improper practices across consumer financial products and services
WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) released its Supervisory Highlights report on legal violations identified during the CFPB’s supervisory examinations in the second half of 2021. The report details key findings across consumer financial products and services.
“While most entities act in good faith to follow the law, CFPB examiners are identifying law violations that lead to real harm,” said CFPB Director Rohit Chopra. “We will continue to examine firms to proactively identify and mitigate harmful practices before they become widespread.”
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB has the authority to supervise large banks, thrifts, and credit unions with assets over $10 billion and their affiliates, as well as certain nonbanks, including mortgage companies, private student lenders, and payday lenders. The CFPB’s supervisory authority also covers large entities in certain markets, including consumer reporting, student loan servicing, debt collection, auto finance, international money transfer, and other nonbank entities that pose risks to consumers.
Supervisory examinations review whether companies are complying with federal consumer financial law. When CFPB examiners uncover problems, they share their findings with companies to help them remediate the violations. Typically, companies take actions to fix problems identified in examinations. For more serious violations or when companies fail to correct violations, the CFPB opens investigations for potential enforcement actions.
Today’s report highlights findings from examinations of practices in the auto servicing, consumer reporting, credit cards, debt collection, deposits, mortgage origination, prepaid accounts, and remittances markets.
Wrongful auto repossessions by servicers
As described in a recent compliance bulletin, examinations have revealed that some servicers were engaging in unfair acts or practices by repossessing vehicles, even after consumers took intentional actions to prevent repossessions.
The timing of auto repossessions is commonly a surprise to consumers. They often lose personal property when the vehicle is repossessed or are unable to hold on to their job due to the lack of transportation. They also incur other significant costs, including the expense of finding alternative transportation, fees related to repossession, and negative marks on their credit reports.
In certain examinations, examiners found that auto servicers engaged in unfairly failing to obtain refunds for borrowers for add-on products that no longer provided a benefit. In other instances, they found that auto servicers misled consumers about the amount of their final loan payments after their normal payments were deferred due to financial difficulties – largely as a result of the COVID-19 pandemic.
Failure by credit reporting companies to conduct reasonable investigations into disputed debts
Credit reporting companies that assemble and evaluate information on consumers – as well as entities, such as banks and servicers, that furnish credit information – play a vital role in people’s ability to access credit. Credit reporting companies are required to comply with several regulations to help ensure their reporting is fair and accurate.
Under the Fair Credit Reporting Act, when a person disputes a debt on their credit report, the credit reporting companies must conduct a reasonable investigation into the accuracy of the information. Examiners, however, have found that the credit reporting companies commonly fail to conduct these investigations in a timely manner, and they also fail to review and consider all the relevant evidence submitted by consumers.
The CFPB released a report in March that highlighted how the credit reporting system is used to coerce families and individuals to pay medical bills that may not be accurate, are being disputed, or may not even be owed. Federal law requires credit reporting companies to ensure that medical bills reported on consumers’ credit reports are accurate. If furnishers of medical bills are contaminating the credit reporting system with inaccurate information, the CFPB expects credit reporting companies to limit their access to the system.
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit consumerfinance.gov.
Build Back Better (BBB) House Version- DOA in Senate
By Brett Scott, Vice President, Government Affairs
Overview: The House recently voted and passed their version of Build Back Better (BBB) Plan, this version is dead on arrival in the Senate and most likely will not be voted on till the end of December, before the holidays. More details of the breakdown in the bill can be found here:
Catalytic Converter Theft
I am writing to you today to ask for your assistance in collecting some additional data points about the rise of catalytic converter thefts from dealership cars and residential vehicles.
WE ARE WORKING ON DRAFTING LEGISLATIVE LANGUAGE FOR A BILL TO BE INTRODUCED IN JANUARY 2022 TO ADDRESS THIS SUPPLY CHAIN ISSUE AND YOUR DATA AND FEEDBACK IS CRITICAL!! If you have experienced any of the following, please email me at firstname.lastname@example.org with as much detail as possible.
- Have any vehicles at your dealership had the catalytic converters stolen? If so, how many? Please describe the incident (location, date, number of cars impacted, projected financial impact).
2.Have you had the theft of catalytic converters reported to you, or have you heard about any of these incidents anecdotally? If so, how many and please describe the incident.
3.If you know the total number of thefts that you have experienced please include that data in your response as well (i.e. ABC Dealership has experienced 10 incidents of thefts since this issue began 18 months ago).
Thank you all, and please let me know if you have any questions.
This information will help us as we attempt to change this legislation.
Dave Cardella, CIADA CEO
What Was in the Provisions that Passed the Ways and Means Committee?
The portion of the reconciliation bill passed by the House Ways and Means Committee on September 15th includes a lot of new tax provisions. Among them, are some significant taxes on pass-through entities and small business owners. Despite the mantra of “tax the rich,” at least some of these provisions will hit a number of small business owners, many of whom would not be typically be considered rich, particularly hard…
McCloskey commemorates 50 years in business by becoming new NIADA president
From BHPH Report Staff
SAN ANTONIO –
The new president of the National Independent Automobile Dealers Association is celebrating a significant anniversary, too.
During the 75th annual NIADA Convention and Expo, Joe McCloskey began his term as for 2021-22 by receiving the President’s Ring; an accomplishment that has arrived during his 50th year in the car business.
The owner of McCloskey Motors in Colorado Springs, Colo., gave his inaugural address during the event’s National Leadership Awards ceremony at the Henry B. Gonzales Convention Center in San Antonio.
McCloskey, who succeeds 2020-21 president Louis Tedeschi, said he is committed to improving NIADA’s services to its members and advocacy for the used vehicle industry, as well as implementing the association’s strategic plan.
“My priority is to work to unify all members, state associations and NIADA to join as one force to elevate our joint efforts to new levels of service to our membership and better protect the interests of our industry,” McCloskey said through an association news release.
“I believe we can accomplish that by continuing to serve NIADA’s renewed commitment to be the national association to all members, regardless of their size or business model,” he continued. “We’ll also continue to assist and develop the management of regional, state and local independent dealer associations.
“The NIADA Dealer 20 Groups program is an NIADA priority,” McCloskey continued. “It’s poised for amazing growth this year. Look for exciting things to happen with our 20 Groups and education programs. Our commitment this year is to make 20 Groups available and affordable for all dealers, regardless of their size or business model.”
As NIADA celebrates its 75th anniversary as an association, McCloskey is celebrating his own milestone –
In 1971, a 13-year-old McCloskey got his first industry job — sweeping the garage floors at Bear Axle and Wheel in Pueblo, Colo. But it didn’t take long for him to start moving up.
McCloskey was soon recruited by a Volkswagen/Mercedes-Benz dealership in Pueblo as what was then called a “lot man.” By the time he was a 17-year-old high school junior, he’d worked his way up to selling cars.
McCloskey went into business for himself in the summer of 1989, but the first location of McCloskey Motors didn’t exactly inspire confidence in his wife, Ann.
“We started in a garage in an alley with one light bulb and no phone,” McCloskey recalled. “At the time we had four children and not much money. I showed Ann this sketchy garage in an alley. I flung open the garage door and there was one light bulb, hanging on a string.
“I told Ann, ‘This is our future! This is the future of McCloskey Motors!’ And being supportive, she said, ‘Yes,’ McCloskey went on to say.
That business has since grown to three locations in Colorado Springs — McCloskey Truck Town, McCloskey Imports and 4x4s and Joe’s Car and Truck Repair — with some 80 employees and 275-300 vehicles in inventory.
McCloskey’s operation has been honored by the Better Business Bureau for Excellence in Customer Service, has twice been named Colorado’s State Quality Dealer and in 2013 won NIADA’s highest dealer award — National Quality Dealer.
From NIADA Legislative Liaison Brett Scott
Most recently, the SBA plans to outline a new initiative aimed at encouraging borrowers with loans of $150,000 or less — accounting for more than 90 percent of the pandemic-era program — to apply for loan forgiveness. The ability to convert PPP loans into grants in exchange for maintaining payroll was a critical feature of the small business rescue. Nearly 7 million of those loans have not been forgiven. The SBA has notified banks — which were responsible for issuing the government-backed loans and processing forgiveness requests — that the agency is setting up its own online, consumer-facing forgiveness platform. Rather than forcing borrowers to apply through banks, the SBA forgiveness site will accept applications from small borrowers directly in a format that officials estimate will take businesses just a few minutes to go through. Lenders will still have a say in whether individual PPP loans should be forgiven, but the intent is to reduce the amount of time and effort that banks have to invest in the process. In addition, the SBA will announce plans to spare certain borrowers who received second PPP loans this year worth less than $150,000 from having to supply documentation proving that they suffered a 25 percent revenue reduction in 2020 that was required to receive the aid. The agency has told lenders that it’s using a combination of data sets to make the determinations, including information based on foot traffic and credit card charging.
NHTSA Launches Interactive, Searchable Recall Dashboard
Website makes over 50 years of recall data easily available to the public
If you were not aware, NHTSA recently released a new cloud based recall dashboard to make searching for auto safety recall data easy and efficient. The dashboard offers user-friendly and transparent ways to sort, filter, visualize and export recall data.
Learn more HERE.