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Volume XII, Number 146

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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.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 133
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About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

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,...

213-617-4171
A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

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...

202-747-2323
Associate

Gabriel is an Associate on the Telecom team and the Co-Lead Associate on the Blockchain and Digital Assets team in the firm’s Washington, D.C. office. He is a Blockchain Law Professional as Certified by the Blockchain Council.

At Sheppard Mullin, Gabriel assists the Telecom team in all aspects of communications law and regulation including, satellites, spectrum, 5G implementation, media companies, and new technologies. He assists the Blockchain and Digital Assets team in legal issues relating to the use of blockchain technology, social media, internet, video games, online gambling,...

202-747-2194
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