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21 October 2020 / Michael J. Dougherty

A New CFPB Consent Order Will Impact Repossessions and Payment Processing


On October 13, 2020, the Consumer Financial Protection Bureau, (CFPB), issued a Consent Order against an auto lender that will affect how repossessions and payment processing are handled in the future.  The order identified multiple violations, related to, among other things, the handling of personal property in a repossession and how phone payment disclosures are made.  

As it relates to the handling of personal property, the CFPB ordered that, “[Auto finance companies] must prohibit its repossession agents (through contract or otherwise) from charging personal property fees to [their] consumers directly and demanding fees as a condition of returning personal property.”  Auto finance companies must ensure that their repossession companies are not conditioning the release of personal property on the payment of a storage fee.  Failure to ensure your repossession partners are not complying with this mandate can expose the auto lender to liability under 12 U.S.C. §§5531(c), 5536(a)(1)(B).
 
The CFPB also ordered that when a consumer calls to make a payment, it must be clearly disclosed to the consumer the fee for each method of making a payment before the consumer is asked which method they wish to use.  In this instance, the auto lender’s payment processor charged $5.00 for an electronic check or in-network debit card payments and $12.95 for credit card and out-of-network debit card payments.  The payment processor failed to disclose this cost difference to consumers who called in to make payments.  The CFPB found this failure to disclose to be a violation of 12 U.S.C. §§5531(c), 5536(a)(1)(B).    Similar to fees being charged for personal property storage, an auto lender must be diligent and maintain a robust third-party vendor management system to ensure their payment processors are providing the necessary disclosures before taking payments.  

The lesson of this recent consent order is that auto lenders must be ever vigilant to ensure their vendors are in strict compliance with all regulatory guidance; and, they must ensure regular audits are conducted to ensure this compliance to avoid regulatory penalties.
 
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.

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Michael J. Dougherty

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