For more information, please visit www.lenderlawwatch.com or www.enforcementwatch.com 19 WHAT TO WATCH CFPB enforcement of SCRA and short-term auto loans | Continuing trends in state v. federal enforcement | Congressional oversight over CFPB enforcement of ECOA CREDIT CARDS AUTO LOANS TELEPHONE CONSUMER PROTECTION ACT CONSUMER FINANCIAL & PROTECTION BUREAU loans. Under the new rule, lenders must conduct a “full- payment test” upfront and determine that borrowers can repay all or most of the debt at once. For single- payment auto title loans in particular, lenders must determine that the borrower has sufficient income to pay the loan and to meet major financial obligations and basic living expenses during the term of the loan and for 30 days after paying off the loan. CFPB Auto Finance Bulletin Is Subject to Congressional Review. In December, the Government Accountability Office (GAO) issued a determination that CFPB Bulletin 2013-02 (“Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act”) is a “rule” subject to the CRA. The bulletin set forth the CFPB view that certain lenders that offer auto loans through dealerships are responsible for “dealer markups” charged to consumers. Pursuant to the CRA, the indirect auto finance bulletin can now be disapproved by a simple majority vote in Congress, thereby enhancing congressional oversight over auto lending and ECOA enforcement by the CFPB. Joint Investigation by State Attorneys General Results in $25.8 Million in Settlements. In March, the Massachusetts and Delaware Attorneys General announced settlements with Santander Consumer USA Holdings Inc., resolving allegations that Santander originated unfair and usurious automobile loans in violation of Massachusetts and Delaware consumer protection laws. According to the AGs, Santander originated subprime loans to more than 2,000 Massachusetts and Delaware consumers despite knowledge that the income reported on the loan applications was inflated or ​​ otherwise incorrect. Santander then sold the subprime loans to investors on the secondary market. The settlements were the result of a joint investigation conducted by the Massachusetts and Delaware AGs. Under the Massachusetts settlement, Santander was to pay $16 million in loan relief to affected consumers and a $6 million payment to the Commonwealth. Under the Delaware settlement, the bank must pay $2.875 million into a trust for the benefit of harmed Delaware consumers and just over $1 million dollars to the Delaware Consumer Protection Fund. DOJ Reaches $907,000 SCRA Settlement with CitiFinancial Credit Company. In September, the DOJ settled claims that CitiFinancial Credit Company violated the Servicemembers Civil Relief Act (SCRA) by failing to obtain court orders prior to repossessing vehicles owned by covered active duty servicemembers. The settlement also resolved claims that the lender failed to properly use a Department of Defense provided database that allows lenders and servicers to confirm whether servicemembers are SCRA protected. This settlement arose out of a 2015 DOJ investigation into an auto loan servicer that purchased loans from the lender. According to the DOJ, that investigation led to the discovery of the lender’s alleged SCRA violations. The lender agreed to pay allegedly affected servicemembers a total of $907,000 in compensation and to delete negative trade lines on their credit report. LOOKING AHEAD TO 2018 In July, a bill was introduced in Congress that would amend the CFPA to allow the CFPB to enforce certain sections of the SCRA as “enumerated consumer laws.” If the bill passes, the CFPB may join the DOJ in enforcing the SCRA in the auto lending context. The CFPB’s November Quarterly Consumer Credit Trends report confirmed that there has been a decrease in auto lending activity in general. The report also noted that the industry has seen an increase in the use of longer-term auto financing. The Bureau concluded that such longer-term loans are riskier because they cost more, are used by consumers with lower credit scores to finance larger amounts, and often have higher rates of default. As a result, auto lenders may see regulators pay increased attention to such longer-term loans in 2018.