CFPB warns auto finance companies against inadvertent repossessions
On February 28, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a bulletin along with a press release, highlighting an issue the agency has written about frequently over the past few years: inadvertent repossessions. Essentially, the bulletin reminds industry of the guidance already published by the CFPB in several editions of the Oversight Highlights and a 2020 consent order, but it’s also a clear reminder that inadvertent repossessions remain one of the Bureau’s highest auto finance priorities.
Inadvertent repossessions are those that occur by mistake – when a consumer has made a sufficient payment or promise to stop the repossession, but it happens regardless. Several errors can cause this, some of which are highlighted in the bulletin:
- Apply a payment to the wrong account
- Failure to process an extension/deferment
- Failure to cancel a repossession order (or all orders, if account is placed with multiple repossession providers)
- Seller failures (recovering the vehicle, even if the order had been put on hold or cancelled)
- Do not cancel active repossession orders when a consumer files for bankruptcy
- Apply payments to the account in a different order than depicted in consumer communications (that is to sayby paying the fee first, which may prevent the account from being sufficiently reimbursed to avoid repossession)
The bulletin also notes instances during oversight reviews in which auto finance companies made representations to consumers about actions that would be sufficient to avoid a repossession, but these statements were inaccurate, resulting in repossessions even when consumers performed the actions.
Consistent with the Bureau’s recent focus on fees, the bulletin also claims that some foreclosures were caused by auto finance companies charging consumers “illegal fees”, but the “fees” mentioned were actually premiums. forcibly imposed insurance. The Bureau further notes that some auto finance companies have improperly charged insurance premiums after repossessions, and (returning to an issue the Bureau first raised in a 2016 version of Oversight Highlights) improperly authorized repossession agents to charge a fee for the recovery of personal property from repossessed vehicles.
After recapping its previous guidance on the issue of inadvertent repossession, the Bureau provides a list of recommended compliance steps regarding the issue. These steps include typical measures such as policies, procedures, review of customer communications and payment application processes, monitoring of repossessions and complaints, logging and root cause analysis. inadvertent repossessions, and vendor monitoring of repossession agents. However, he also notes something that had not been presented before in Oversight Highlights: have a process to “reimburse consumers for direct and indirect costs incurred as a result of illegal seizures, if any”. This concept of consumer restitution was present in the CFPB’s 2020 consent order on this matter, but it is the aspect of the Bureau’s recent guidance that is probably the least prevalent in the industry today, and it therefore deserves special attention.
Essentially, the bulletin summarizes the existing guidance as previously viewed by the Bureau, and it confirms the type of compliance measures adopted by many auto finance companies in recent years. But the release of the bulletin and the now typical, heavily worded press release comparing inadvertent repossessions to the “theft” of a car and claiming that “[a]Auto loan managers must ensure that every repossession is legal,” should recall that the subject of inadvertent repossessions will remain an area of scrutiny by the CFPB.