On September 30, 2015, the CFPB ordered an indirect auto lending company and its auto lending subsidiary to pay $48.3 million in fines for alleged FDCPA, TILA, and UDAAP violations. The CFPB alleges that the companies manipulated borrowers by using phony caller ID information and lying about imminent repossession or criminal charges in order to induce loan payments. The CFPB also alleges that the companies also contacted third parties of the borrowers and made similar misrepresentations about the borrower’s account. The CFPB also threw in a few TILA advertising violations related to the disclosure of APR. In its press release announcing the enforcement action, CFPB Director Cordray vowed to “continue to clean up the debt-collection market.”

In its Consent Order, the CFPB further alleges that the company engaged in the following acts in violation of federal consumer financial protection laws:

FDCPA

  • Falsely represented the origin of debt collection calls, indicating that the calls were from a repossession company or similar third party and implying that repossession was imminent to persuade borrowers to pay.
  • Communicated with borrowers’ references, friends, employees, and family members to acquire information, other than the location of the borrower, without the prior consent from the borrower.

TILA

  • Advertised a rate without disclosing the annual percentage rate.
  • Advertised a rate and displaying it less conspicuously than the monthly rate.
  • Failed to provide applicable annual percentage rate(s) in response to oral inquiries about the cost of credit being offered.

UDAAP

  • Misrepresented the origins of debt collection calls to convince borrowers that repossession was imminent, thereby persuading them to pay.
  • Communicated with borrowers’ references, friends, employees, and family members and implied that the call was from a repossession company or legal enforcement agency and that the borrower was facing imminent repossession, possible criminal charges, or investigations.
  • Falsely represented to borrowers, whose cars were previously repossessed, that the company was calling from a car storage facility and that the borrower’s car would be released upon repayment of a portion of the balance when, in fact, the company would only release the car for full payment of the balance.
  • Changed due dates on loan accounts and extended loan terms without consulting borrowers, then subsequently convinced borrowers to adopt the loan terms by implying that the new terms would have a positive impact on the borrower.
  • Misrepresented advertising rates to customers by failing to disclose the APR and, separately, displayed APRs less conspicuously than other advertised rates.
  • Misrepresented the cost of credit to the borrower by failing to provide the APR in response to the consumer’s oral inquiry regarding the cost of credit being offered.

This enforcement action serves as another reminder that the CFPB has its eyes on the indirect auto lending market and will continue to focus its UDAAP authority on hot-button issues, including debt collection.