CFPB looks at unfair and deceptive acts: here are some tips to avoid scrutiny | McGlinchey Stafford

Excellence in Automotive Financing – April 5, 2022

With a new administration comes new priorities for federal agencies, and the Consumer Financial Protection Bureau (CFPB) is no different. During the Trump administration, the Bureau focused on “educating” consumers. Under President Biden, the CFPB has signaled, through words and actions, a return to much more aggressive monitoring and enforcement measures.

Over the past few weeks, and due to the current economic climate, the CFPB has indicated that this new approach will focus in part on the auto loan and servicing sectors. Like many other goods and services, the price of vehicles has skyrocketed, causing many consumers to borrow more to finance the purchase of a vehicle. Over the past year, Consumer Price Index data shows the price of used vehicles has increased 40%, with little sign of slowing down.

The CFPB recently issued two bulletins highlighting its concerns about business practices in the auto finance and servicing sectors due to inflation and the possibility that rising vehicle prices will exacerbate repossession practices. at risk.

The CFPB closely monitors a number of Unfair and Deceptive Acts or Practices (UDAAPs) of which automotive finance and service companies should be aware, particularly in relation to the use of technology and in connection with the repossession.

Ensure UDAAP compliance

The Bureau’s actions demonstrate a clear intent to prioritize the investigation and prosecution of auto finance and servicing companies for UDAAP violations in the age of inflation. To avoid finding yourself the subject of an enforcement action, or to ensure a smooth monitoring and review process, here are some considerations, some highlighted by the Bureau, to ensure your business is compliant with UDAAP:

  • Make sure that if you use newer technology to service auto loans, your policies and procedures explain the rationale for the technology and identify the benefits that said technology offers consumers.
  • Review policies and procedures, including call scripts, as well as any written representations on your company’s website (or elsewhere) to verify the accuracy of steps a customer can take to avoid replay. possession.
  • Make sure you have sufficient policies and procedures regarding the cancellation of repossession orders. This includes: (a) ensuring that cancellations are made in a timely manner; (b) the cancellation is communicated in a timely manner to sellers and repossession agents; (c) a system for monitoring third party compliance with rescission orders is in place; and (d) your business monitors wrongful repossessions and has a corrective action plan in place to reimburse consumers if necessary for wrongful repossessions.
  • Review policies and procedures regarding the allocation of payments and ensure they are in the order described in consumer contracts and other consumer disclosures. Likewise, review and monitor all charges billed before and after repossession and ensure that there is a good faith basis for the charge and/or that the charge is expressly authorized by the applicable contract.
  • Investigate consumer complaints regarding repossession and ensure there is an appropriate channel to properly receive, investigate and resolve consumer complaints regarding wrongful repossession and illegal charges after repossession.
  • Conduct regular reviews of service providers, including repossession providers, regarding their practices.
  • Monitor any FPI programs to ensure that consumers are not being charged for unnecessary FPIs. This may include reviewing FPI cancellation rates.

This article is the first in a two-part series. the second installment describes the CFPB’s particular focus on the use of technology and consumer privacy issues, as well as auto finance practices in the context of repossession.


This article was first published in Auto Finance Excellence, a sister service to Auto Finance News. McGlinchey is pleased to be the Official Compliance Partner of Auto Finance Excellence, providing insight and thought leadership through webinars, podcasts and monthly columns.

Edward N. Arrington