October 3, 2022

Volume XII, Number 276


October 03, 2022

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CFPB: Auto Loan Servicers Must Ensure Lawful Repossessions

On February 28, the CFPB issued Bulletin 2022-4 regarding repossession of vehicles, and the potential for violations of the Dodd-Frank Act’s prohibition on engaging in unfair, deceptive, or abusive acts or practices (UDAAPs) when repossessing vehicles.  The CFPB has promised to use all appropriate tools to hold auto lenders and servicers accountable if they engage in UDAAPs in connection with their activities.  Based on recent examinations and enforcement actions, the CFPB has observed the following activity in the auto finance industry:  illegally seizing cars, sloppy record-keeping, unreliable balance inquiries, and ransom for personal property.

To prevent UDAAPs, the CFPB notes that entities should, among other things, consider doing the following:

  1. Review policies and procedures, including call scripts, to ensure that they provide employees with accurate information about steps consumers can take to prevent repossession;

  2. Monitor repossession service providers for compliance with repossession cancellations;

  3. Review consumer contracts to validate that any fees charged to consumers are authorized under the terms of applicable contracts; and

  4. Perform regular reviews of service providers, including repossession vendors, as to their pertinent practices.

Putting in Into Practice:  This bulletin represents the latest in a series of public warnings from the CFPB that it is closely monitoring auto industry conduct, especially as it relates to ensuring affordable credit, servicing and collections, and fair competition (we recently discussed the CFPB’s latest look at auto finance companies in a previous Consumer Finance and FinTech blog post here).  Auto finance companies should be mindful of these warnings and consider taking action to implement some of the best practices in this bulletin before becoming the subject of a supervisory examination or an enforcement action.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 66

About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...