CFPB Issues UDAAP Warning on Vehicle Repossession

The CFPB recently issued a Compliance Bulletin on potential UDAAP issues related to vehicle repossession.

Many servicers provide options that allow borrowers to avoid having a vehicle repossessed.

For example, a servicer might indicate a vehicle will not be repossessed until someone is at least 60 days past due or if someone has agreed to extend a loan term or make a payment by a specific date.

The CFPB has noted unfair practices with the repossession process, despite borrowers complying with prior agreements and steps to avoid repossession. Servicers have also violated automatic bankruptcy stays and made inaccurate statements on the amount necessary to bring an account current to end any delinquency. Some examples provided include:

• Applying payments in a different order than disclosed to consumers, resulting in repossession
  Even though the loan contract didn’t dictate how payments were to be applied, servicers’ websites provided inaccurate information.

• Unlawful fees that push consumers into default and repossession
  Force-placed insurance policies were not canceled, even after borrowers obtained their own policies.

• Charging illegal personal property fees
  Servicers, as well as their agents, withheld personal property until fees were paid to recover it.

• Charging for Collateral Protection Insurance after repossession
  Servicers continued to bill, and sometimes collect for, force-placed policies even after repossession by failing to communicate with the force-placed insurance provider; calculating charges incorrectly; and/or incorrectly inputting the date of repossession.

The CFPB recommends the following actions to avoid similar issues:

• Review policies, procedures, scripts, etc., to make sure they are accurate as to how borrowers can avoid repossession.
• Review policies and procedures to make sure processes to cancel any scheduled repossession are laid out, including communications with any third-party service providers.
• Monitor any third-party service providers, ensuring that, when a scheduled repossession is canceled, the service provider acts accordingly.
• Monitor for “wrongful repossession”, unauthorized fees, and borrower communications.
• Make sure there is a plan in place for corrective action and potential reimbursement if violations have occurred or borrowers have unfairly been charged unauthorized fees.
• Make sure any communication on posting payments is accurate and consistent and in line with what is actually happening.
• Make sure any complaints are handled appropriately.

It’s been a while since we’ve seen such a focus on auto lending and servicing. In case you missed it, the CFPB also put out a blog highlighting concerns related to rising auto debt. Check out the Management Minute in our March 2022 Magazine for more on that. Maybe it’s been a while since you’ve dug into your auto lending process. From loan pricing and terms to repossession, it’s becoming clear this isn’t an area you want to sleep on. Even if you have very little activity in this area, it’s important files are well-documented with borrower communications, especially when it comes to delinquent borrowers.