CFPB Blog: Stop Overcharging for Auto Loan Add-on Products
On May 2, the CFPB published a blog post demonstrating its commitment to “a fair, transparent, and competitive auto lending market” by calling attention to add-on products for which auto dealers and finance companies “often charge consumers all payments for any add-on products as a lump sum at origination of the auto loan, and they generally include the lump sum cost as part of the total vehicle financing agreement.” CFPB examiners have focused on how servicers manage these add-on product charges when the loan ends prior to when the add-on product’s potential benefits end.
The CFPB notes that its recent Supervisory Highlights reports that examiners found that servicers engaged in unfair practices by failing to request refunds from the third-party administrators for “unearned” fees after the consumer was no longer in possession of the vehicle. Examiners also found that some servicers engage in unfair acts or practices by miscalculating extended warranty products or other product refunds after repossession and attempting to collect miscalculated deficiency balances.
Putting It Into Practice: This blog post 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, compliant servicing and collections, and fair competition (we recently discussed the CFPB’s latest look at auto finance companies in previous blog posts here and here). Auto finance companies should be mindful of these warnings and consider taking action to implement some of the best practices in this blog before becoming the subject of a supervisory examination or an enforcement action.