Blog Enforcement Watch November 03, 2020

CFPB Settles with Auto Lender for Alleged UDAAP Violations

On November 2, 2020, the Consumer Protection Financial Bureau (CFPB) announced that it had entered into a consent order with a Texas-based auto lender.  The CFPB alleged that the auto lender engaged in deceptive acts and practices in violation of the Consumer Financial Protection Act (CFPA) by falsely claiming that its SMART payment plan (Plan) would save consumers money.  Under the SMART Plan, payments are deducted from consumers’ bank accounts every two weeks and forwarded to their auto lenders.  However, the CFPB alleged that the company failed to disclose that the fees associated with this Plan would ordinarily exceed the interest savings achieved through the Plan, creating a misleading impression that consumers would save money if they used the product.

The consent order requires the company to pay $7,500,000 in consumer redress, but full payment is suspended due to the company’s demonstrated inability to pay based on sworn financial statements.  Instead, the company is only required to pay $1,500,000 and a $1 civil money penalty to the Bureau.  The consent order also prohibits the company from further engaging in the alleged behavior.