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THE CFPB JUST TOLD US WHAT TO LOOK FOR NEXT

Writer's picture: Joe AllenJoe Allen



In its just published Summer Supervisory Highlights, the CFPB took aim at how auto servicers (BHPH dealers and finance companies are also susceptible) handle final payments made by automatic payments.  


What the Bureau Said


The Bureau noted that its "Examiners found that servicers engaged in unfair acts or practices by failing to debit consumers’ final payment via their autopay system without adequate notification to borrowers enrolled in autopay that they need to make the final payment manually".  


The Bureau stated "Servicers offered pre authorized recurring electronic fund transfer enrollment for consumers to make automatic payments on their loans. The servicers’ autopay systems did not debit consumers’ final payments when they were a different amount from their regular monthly payments. Servicers failed to adequately communicate to consumers that they must remit the final payment manually, despite being enrolled in autopay. Servicers then charged consumers late fees for failing to make the final payment on time. This practice caused substantial injury to the consumers in the form of late fees assessed when the final payment was not made. Consumers could not reasonably avoid the injury because they had no control over the autopay system the servicers chose to use. Further, consumers did not reasonably anticipate that a servicer’s autopay system would not make the final payment. Consumers could not reasonably foresee incurring a late charge as a result. The injury was not outweighed by any countervailing benefits to consumers or competition. In response to these findings, servicers are revising their policies and procedures to ensure that they either include the final payment in autopay withdrawals or adequately notify consumers enrolled in autopay if and when a payment is required to be submitted manually.  

 

Why This Matters

 

We frequently see the scenario referenced by the CFPB when the final payment is for a lower amount than the rest of the Autopay payments.  We also frequently see that state examiners pick up on what the CFPB addresses in its Supervisory Highlights and add these points to their examination checklists.  We think it's likely that many states will start looking for this type of behavior.

 

Call to Action

 

Make an effort to conduct self evaluation on this issue.  Could you be susceptible to the fact pattern addressed by the CFPB?  If so, it could leave you open for scrutiny from your state regulator and also from lawyers that will not be looking for this behavior.  This has class-action lawsuit potential, too, because of its repetitive nature.

 

Ignite Can Help

 

Reach out to Ignite for help at info@ignitecp.com.  We can review your Autopay forms and practices and create policy and training content to help you avoid an unfortunate result.

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