CFPB Enters Into $15 Million Settlement with Auto Lender

On February 23, 2023, the Consumer Financial Protection Bureau (CFPB) announced that it entered into a consent order​ with an auto lender based in Georgia.  The order resolves allegations that the lender engaged in unfair practices and predatory lending as to military families on auto title loans in violation of the Consumer Financial Protection Act (CFPA), 12 U.S.C. §§ 5531 and 5536, the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq. and its implementing Regulation Z, 12 C.F.R. part 1026, and the Military Lending Act, 10 U.S.C. § 987 and its implementing regulation, 32 C.F.R. part 232.  The order is the first against a nonbank lender in connection with title loans to military families.

According to the CFPB, the Georgia auto lender is a “repeat offender” as it has been under a CFPB order since September 2016, which was previously covered by Goodwin here.  In the prior order, the lender agreed to pay a $9 million penalty in connection with alleged illegal high pressure debt collection practices, offers of a “monthly option” for loan payments, and misrepresentation of the true cost of its renewed loans.​​​​

In the instant action, the CFPB alleges that the auto lender made at least 2,670 auto title loans to military families between October 3, 2016 and September 17, 2021 that violated the Military Lending Act by exceeding the 36% annual interest rate cap.  The lender also allegedly increased loan payments for military borrowers by charging unlawful fees and failing to disclose information about the rights available under the Military Lending Act, which limits title loans and annual interest rates and prohibits mandatory arbitration clauses and unreasonable notice provisions.  The CFPB further alleges that the lender circumvented the regulation by modifying personally identifiable information to prevent servicemembers and their dependents from being identified.  The CFPB also alleges that the lender improperly charged fees for a useless insurance product on thousands of loans, which did not actually provide coverage for these loans.

Under the consent order, the auto lender agreed to pay $5.05 million in consumer relief and a $10 million civil consumer penalty.  The lender also agreed to implement and maintain internal controls and testing to comply with existing law and regulations.