PassTime would like to bring to your attention some recent Consumer Financial Protection Bureau (“CFPB”) bulletins which relate to our industry and the practices we should abide by regarding vehicle repossession and social media reporting. These changes can affect how your business or customers business is operating. Unfair, deceptive, or abusive acts or practices (UDAAP) are violations of the federal consumer financial laws, and these new regulatory changes create serious implications for nonbank lenders, financial services and technology service providers, and other nonbank covered persons who are typically not considered subject to the Bureau’s authority – including many PassTime customers. We also bring to your attention the recent CFPB updated exam manual, which holds both intentional and unintentional discrimination to be UDAAP violations, with examples. We have attached the CFPB 2018 Auto Examination Manual (pg. 40) so you may read them and share them with your respective employees and counsel. CFPB Supervision and Examination Manual (consumerfinance.gov)
CFPB 12 CFR Chapter X Bulletin 2022-04: Mitigating Harm from Repossession of Automobiles specifically covers businesses which issue financing for vehicles and maintain a security interest in the vehicle as collateral (whether by direct financing or RISC financing, which includes dealers, fincos, and their service providers including PassTime), which we refer to as “Secured Parties.” CFPB 12 CFR Chapter X Bulletin 2022-05: Unfair and Deceptive Acts or Practices That Impede Consumer Review is broader and covers sellers and lessors of goods and services to individual consumers but will apply here as well. CFPB Manual V.3, Unfair, Deceptive, or Abusive Acts or Practices outlines acts the CFFPB considers UDAAP violations, with examples including but not limited to discriminatory practices, outside the Equal Credit Opportunity Act.
Bulletin 2022-04, “Mitigating Harm from Repossession of Automobiles,” mentions the low inventory of used vehicles and related high demand. In this Bulletin, the CFPB expresses concern that Secured Parties may be tempted to employ risky practices in repossessing, or choosing to repossess, a vehicle before it may be proper – thus potentially resulting in UDAAP violations for which it will hold Secured Parties accountable.
The loan holder or servicer must be clear to the consumer so the consumer understands under what conditions repossession will happen. Moreover, the loan holder or servicer must keep its promises to the consumer in this regard and not repossess when it has indicated it will extend due dates or agree to partial payment, etc.
Loan holders and servicers must also be careful to not commit avoidable errors in their bookkeeping/collection practices – mislabeling a consumer as in default, failing to cancel repossession orders after an account becomes current or arranges to make payment, or a repo agent failing to confirm the repossession order just prior to repossession. Both repossessions during a bankruptcy as well as repossessing a vehicle as a result of processing payments in a different order than had been communicated to the consumer are wrongful. Regarding PassTime, this means our customers should ensure a vehicle is validly due for repossession before using the PassTime solutions (including Starter Interrupt) to enforce repossession.
Bulletin 4 also contains numerous other examples of potential unfair and abusive practices (prioritization of processing of fees collected, unlawful fees pre- and post-repossession, including collateral protection insurance, and post-repossession of personal property, among others). We urge all customers to review it carefully.
Bulletin 2022-05, “Unfair and Deceptive Acts or Practices That Impede Consumer Reviews” relates to the use of social media; in our case, a dealer/service provider/finco’s effective censoring of negative social media comments posted by consumers. Basing its bulletin on 2016’s Consumer Reviews Fairness Act (CRFA), it primarily points to contracts that may have unenforceable provisions limiting a consumer’s right to post negative reviews. However, it also applies to the situation where a seller/lessor pressures a consumer to remove a negative review based on those same contract provisions. A covered person who encourages employees or an outside service to post positive reviews or to dislike negative reviews was also found to have been deceptive and improper. Finally, failing to post or publish negative reviews selectively would also violate the CRFA. In closing, the CFPB said it was investigating for other types of social media control that might also render a seller/lessor of goods or services liable.
The Federal Trade Commission (FTC) has also been working on addressing unfair and deceptive acts and practices in the auto industry. Similarly to actions taken by the CFPB, on March 31, 2022, the FTC reached a record setting $10 million settlement with North American Automotive Services, alleging that the dealership under the name Napleton with multiple locations – used a host of deceptive and unfair tactics related to hidden fees for add-ons like service contracts, gap insurance, and maintenance plans. According to the FTC and Illinois, the defendants engaged in discriminatory practices that resulted in Black car buyers paying disproportionately higher interest rate markups than similarly situated non-Latino White applicants.
In recent years, the CFPB and FTC have levied significant fines against entities for violations of the laws pertaining to vehicle financing and repossession. CFPB Director Chopra on February 28, 2022, acknowledged GPS Trackers and starter interrupt technology have made repossessions easier and cheaper to perform. Still, by issuing Bulletin 4, the CFPB has indicated it will continue to monitor Secured Parties to ensure repossessions are fair and equitable. PassTime will continue to assist its customers in providing them the information and tools to assist in a vigilant approach to compliance.
The bulletins are linked below.
CFPB_ Bulletin 2022-05_2022-06446.pdf (federalregister.gov)
CFPB Supervision and Examination Manual (consumerfinance.gov)
If you have any questions regarding this notice, please reach out to Corinne Kirkendall, EVP of Compliance and Regulatory Affairs for PassTime.
Thank You for your continued support.