Auto loan servicers need to pay careful attention to their repossession practices and particularly, their policies concerning repossession fees. The clear message from the CFPB’s Supervisory Highlights is that examiners are focused on repossession activities, “including whether property is being improperly withheld from consumers, what fees are charged, how they are charged, and the context of how consumers are being treated to determine whether the practices are lawful.” Supervisory Highlights, p. 6 (Issue 13, Fall 2016).
The Report makes clear that the CFPB’s position is that it is an unfair practice to detain or refuse to return personal property found in a repossessed vehicle where the consumer requests return of the property. Similarly, it is an unfair practice to detain or refuse to return personal property until the consumer pays a fee. According to the CFPB, even when the consumer agreements and state law may support the imposition of a fee, there are no circumstances in which it is “lawful to refuse to return the property until after the fee…[is] paid, instead of simply adding the fee to the borrower’s balance as companies do with other repossession fees.” Id. The Report also noted that in one or more examination, companies engaged in an unfair practice by charging a borrower for a storage fee for personal property found in the repossessed vehicle when the consumer agreement disclosed that the property would be stored, but not that a fee would be imposes for doing so.
Auto loan servicers need to examine their policies and procedures regarding their repossession practices to insure they are in line with the CFPB expectations. Additionally, auto loan servicers should monitor their third party vendors’ practices for compliance with the CFPB examinations and make any adjustments necessary as to repossession fees.