New York AG Settles with Auto Dealership over Alleged Deceptive Practices

On June 21, New York AG Eric Schneiderman settled with a New York-based auto dealership to resolve allegations of deceptive sales and advertising practices. Specifically, AG Schneiderman alleged that the company charged consumers up to $5,000 for warranties and service contracts without their authorization and convinced consumers to purchase and finance vehicles on terms they could not afford, falsely promising to refinance the loans on more favorable terms in the subsequent months. In addition, the AG’s office received a number of consumer complaints alleging that the company (i) engaged in various bait and switch tactics, including crediting consumers for less than previously agreed on vehicle trade-ins; (ii) charged consumers a greater price for a vehicle than promised; (iii) charged consumers a higher interest rate on the auto loan than promised; (iv) falsely promised lower yearly mileage limits for lease contracts; and (v) forged consumer signatures on contracts. Pursuant to the settlement agreement, the company must pay restitution ranging from $198 for alleged illegal fee charges to more than $4,000 for unauthorized warranties and services contracts, for a total of more than $101,000 to 119 consumers. The settlement further requires that the company “pay restitution to other consumers who come forward within the next three months and who were subjected to the deceptive and illegal practices uncovered by the investigation, with a cap of $50,000.”

AG’s Schneiderman’s settlement comes after the New York State Police completed a raid and seizure of the company’s business records in May 2012. The company’s finance manager was subsequently arrested for second-degree Scheme to Defraud and third-degree Criminal Possession of a Forged Instrument.

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Michigan AG Announces Default Judgment against Auto Title Loan Company

On June 8, Michigan AG Bill Schuette announced that a Michigan court entered a Default Judgment and Final Order for Permanent Injunction against an auto title loan company, several associated alias companies, and the company manager. The Judgment and Order found the defendants in violation of Michigan law for: (i) engaging in consumer lending without requisite authority or license in Michigan; (ii) charging or receiving interest on title loans in excess of 36%; (iii) misrepresenting in communications with borrowers the status of legal action taken or threatened to be taken in violation of Michigan’s Regulation of Collection Practices Act; (iv) engaging in conduct deemed unlawful under the Michigan Consumer Protection Act during the course of soliciting, selling, and collecting upon unauthorized title loans with illegal interest rates; and (v) transacting business in Michigan without a certificate of authority since at least June 28, 2013. Under the court’s judgment, the company is prohibited from, among other things, (i) making loans in Michigan without proper licensure; (ii) making, servicing, or collecting on any title loans sold or issued to certain Michigan consumers; (iii) accepting title loan interest or other payments made by certain Michigan consumers; (iv) engaging in any collection activities on title loans issued by defendants for certain Michigan consumers; (v) asserting a security interest in any vehicles allegedly pledged as security for repayment of a title loan; and (vi) selling or otherwise transferring interest in any motor vehicle associated with a title loan. The company must also pay a total of $2,208,698, $790,050 of which will be paid to the State and $1,418,648 of which is allocated for consumer restitution.

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CFPB Releases “Know Before You Owe” Auto Initiative

On June 9, the CFPB released an auto loan worksheet designed to help consumers shop for an automobile loan. As part of its Know Before You Owe auto initiative (also known as the Take Control of Your Auto Loan initiative), the online worksheet is intended to help consumers: (i) understand the aggregate amount of the loan – not just the monthly payment – including the interest rate, optional add-ons, and certain fees; (ii) negotiate and compare between loan offers; and (iii) be mindful of how additional financing features, services, or add-ons, such as guaranteed auto protection insurance, extended warranties, and credit insurance, can increase the upfront cost of a loan. In addition to the auto loan worksheet, the CFPB’s Know Before You Owe auto initiative also contains a step-by-step guide designed to help consumers navigate the auto lending process.

The CFPB simultaneously released a report titled “Consumer Voices on Automobile Financing.” The report covers research related to direct and indirect auto financing, but does not address financing offered by “Buy Here Pay Here” dealers or leasing. Read more…

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South Carolina Approves House Bill 4548, Amends Motor Vehicle Closing Fee Statute

On June 2, the South Carolina legislature passed House Bill 4548, which amends section 37-2-307, Code of Laws of South Carolina, to give the Department of Consumer Affairs (the Department) the authority to regulate motor vehicle closing fees for reasonableness. Pursuant to HB 4548, if a motor vehicle dealer charges a closing fee of less than $225 per vehicle, the Department will not conduct a review of the amount of the closing fee. For closing fees exceeding $225, the Department may conduct a review for reasonableness that permits including the following in a closing fee: (i) all administrative expenses, costs, staff, supplies, materials, and financial work required to transfer the motor vehicle to the consumer and to obtain the closing of the transaction; (ii) all costs for administrative expenses, costs, staff, supplies, and materials needed by the dealer to ensure compliance with all state, federal, and lender requirements; (iii) all costs for administrative costs, staff, and materials needed to prepare and retrieve documents; (iv) all costs for administrative costs, staff, supplies, and materials required to protect the consumer’s private personal information; and (v) all costs for administrative costs, staff, supplies, and materials required for records retention and storage costs of those records. Read more…

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CFPB Announces Consumer Advisory Board Meeting

On June 9, the CFPB will hold its next Consumer Advisory Board meeting in Little Rock, AR. According to the meeting’s agenda, the Board will discuss (i) an auto lending education initiative; (ii) trends and themes; and (iii) payday lending. Director Cordray and Assistant Director for Regulations Kelly Cochran are among the CFPB personnel who are scheduled to speak at the meeting. The event is open to the public.

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