CFPB and New York AG Announce Joint Enforcement Action Against Auto Lender

On January 4, 2023, the Consumer Financial Protection Bureau (CFPB) and New York State Office of the Attorney General (NY AG) announced a joint enforcement action against one of the country’s largest publicly-traded indirect auto lenders.

The 8​​​​-count complaint​, filed in the United States District Court for the ​Southern District of New York, alleges that the Michigan-based company makes predatory loans by taking unreasonable advantage of consumers’ lack of understanding of the risk of default and inability to protect their interests.  The CFPB and NY AG argue these practices are deceptive and abusive in violation of the Consumer Financial Protection Act of 2010 (CFPA).  The NY AG also alleges that the lender violated New York Executive Law § 63(12), New York General Business Law § 349, and the Martin Act, New York GBL § 352​

Specifically, the complaint alleges that the lender markets itself to consumers with limited credit options and uses an algorithm that disregards a consumer’s ability to pay, and instead predicts how much the lender will collect over the life of the loan, knowingly setting consumers up to fail.  The complaint also alleges that the lender’s business model hides the true cost of credit, noting that in New York alone, more than 84% of the lender’s loans exceeded the 25% penal usury cap.  In addition, the complaint alleges that the lender incentivized dealers to sell cars with hidden costs despite knowing that dealers were misrepresenting the voluntary nature of add-on products.

The complaint seeks, among other things, injunctive relief, restitution and damages for all injured consumers, rescission or reformation of contracts obtained by fraud, misrepresentation or abusive practices, and disgorgement of profits.  The complaint also seeks civil money penalties​ under New York Law and the CFPA, and such other and further relief as the Court deems just and proper.