Banks that serviced auto loans repossessed cars from delinquent consumers, even though an agreement had been reached to cancel the repossession, according to a report from the Consumer Finance Protection Bureau, an independent federal agency tasked with overseeing financial institutions.
The CFPB issued a report last Thursday that spells out its findings from examinations of financial institutions that were conducted between December and May, including the area of automobile loan servicing.
In particular, the CFPB said it found “deceptive and unfair acts or practices related to billing statements and wrongful repossessions.”
The report offers a generalized summary of the agency’s supervisory work during the first part of 2018 with automotive loans, and it doesn’t specify specific institutions involved. But it offers a glimpse of what kind of conduct goes on during the car buying process.
For example, the agency found issues with some agreements that stipulated proceeds from insurance companies when a vehicle has been totaled should be applied “as a one-time payment to the loan with any remaining balance to be collected according to the consumer’s regular billing schedule.”
“However, in some instances after consumers experienced a total vehicle loss, the servicers sent billing statements showing that the insurance proceeds had been applied to the loan payments so that the loan was paid ahead and that the next payment on the remaining balance was due many months or years in the future,” the reporte dstated.
“Servicers then treated consumers who failed to pay by the next month as late and in some cases also reported the negative information to consumer reporting agencies.”
Because that’s what people want out of their loan servicer—a blemish on their credit report for something they didn’t do or expect, after the total loss of their vehicle.
Loan servicers also deceived consumers by sending billing statements “indicating that consumers did not need to make a payment until a future date when in fact the consumer needed to make a monthly payment,” the agency found. Sometimes payment dates would be incorrect. Which is relevant for the consumer, because if they missed their monthly payment as a result, it could lead to late fees or a delinquency notice.
Loan servicers also royally screwed up on auto repossessions, as well, according to the report.
Oftentimes, the CFBP says, banks will give delinquent consumer a chance to avoid repossession by offering a formal extension to their loan agreement, or may even cancel a repossession order if the consumer makes a payment.
But during its examinations, the CFPB found that “servicers repossessed vehicles after the repossession was supposed to be cancelled” under two sure-to-piss-you-off scenarios, such as:
In these instances, the servicers incorrectly coded the account as remaining delinquent or customer service representatives did not timely cancel the repossession order after the consumer’s agreement with the servicers to avoid repossession.
The agency concluded this was an “unfair practice,” as identified under federal law, which makes sense, because wrongfully repossessing someone’s car could lead to a hole host of issues, the least of which being not having a car to get to work, so you can pay bills and avoid becoming trapped by debt.
“Such injury is not reasonably avoidable when consumers take action they believed would halt the repossession and there is no additional action the borrower can take to prevent it,” the CFPB said, before going on to add this hilariously understated line:
No benefits to competition are apparent from erroneous repossessions.
The CFPB said that, in response to its findings, the unnamed servicers are stopping the practice, reviewing affected consumers’ accounts, and remediating them for any repossession-related fees. It’s unclear how, or if, the CFPB will follow up to ensure this is completed.
The agency fined Wells Fargo for $1 billion earlier this year over the bank’s auto insurance scandal that led to thousands of wrongful repossessions. We reached out to the CFBP for comment on what other banks were ensnared by the CFPB’s examinations of car repossessions. We’ll update the post if we hear back.