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This Shouldn't be So Hard: The CFPB’s Warning Shot with the USASF Complaint

Updated: Aug 12, 2023

by Richard Hudson


Important Note: The allegations in the lawsuit against USASF by the Consumer Financial Protection Bureau have not been proven and the defendant has not admitted any wrongdoing. USASF is entitled to defend itself in court. The information is provided in this article to emphasize the regulatory priorities of the CFPB.

For years, we at Ignite have been speaking and writing about the exact types of violations alleged in the complaint against USASF. The allegations in the suit are not new, they are issues that the CFPB has addressed in Supervisory Highlights and other guidance. These areas of compliance are well-documented, well-understood, and easy to correct with some effort.

The complaint against USASF should be a call to action for dealers across the nation. The claims described in the complaint can be guarded against with proactive planning. We encourage our readers to view this complaint as a strong signal that time is up for complacency and negligence.


The Allegations

The CFPB's complaint against USASF alleges some critical compliance violations and is a reminder that you should be focused on what regulators are focused on. Below is a summary of the key accusations:

  1. Failure to Ensure Refunds of Premiums: The CFPB alleges that the defendant failed to refund unearned GAP premiums denying them at least $7 million. The Bureau alleges the defendant’s policy stated that they were issuing refunds, but they weren't happening consistently and seem to suggest that no one was monitoring the execution.

  2. Double Billing of Collateral-Protection Insurance (CPI): Another claims alleges that they charged at least 34,000 consumers twice for CPI, amounting to $1.9 million, delinquencies, repossessions, and errant collections efforts.

  3. Misapplication of Consumer Payments: How many of you apply your payments to CPI first? Well, the CFPB alleges this was an improper application that happened at least 8,738 times, resulting in consumers paying around $1.2 million in additional interest and fees. If you had to defend your process, where is the document outlining your legal justification for your payment waterfall?

  4. Wrongful Repossession of Consumer Vehicles: The lawsuit says that at least 82 consumers had their vehicles wrongfully repossessed when the repo order wasn't rescinded after a payment or arrangement was made. The vehicles were either sold or unavailable for 17 days.

  5. Violation of the Consumer Financial Protection Act (Unfairness): The suit claims that all of the above acts were in violation of the CFPA, constituting unfair practices that caused substantial injury to consumers. These injuries were neither reasonably avoidable by the consumers nor outweighed by any benefits, making them violations of the law.


Call to Action

As with previous actions by the CFPB, this is just the start. They tend to trickle down to state regulators and find their way into their examination manuals, not to mention a legion of plaintiffs’ lawyers bringing copycat lawsuits. Dealers who continue to ignore compliance are treading dangerous waters.

1. Understanding the Laws: Understanding consumer financial protection laws is not just a legal obligation; it's a business requirement. Compliance must begin with education, understanding the full spectrum of responsibilities, and the potential legal and financial repercussions.

2. Implementing Comprehensive Change Starts with a Robust CMS: The era of the "check the box" has got to be put behind us. This is not a time for patchwork solutions or window dressing. Compliance isn't a class you take once a year in January, it's ongoing. You have to instill a culture of compliance, backed by robust policies, vigilant oversight, and ongoing training.

3. Regular Auditing and Monitoring: In the fast-paced world of auto sales and finance, it's easy to be distracted with what can seem like more important operational concerns. Compliance needs to be baked into your organization in the same way sales and collections are. Regular audits and monitoring are vital to catch errors early and rectify them promptly. That's not enough, though. Audit findings have to be followed up with change and that only comes when compliance efforts have the support of senior management and ownership.



Act Now: Don't wait for a regulatory knock at the door or a lawsuit. Engaging with legal and compliance experts, conducting internal reviews, and addressing any identified shortcomings should be immediate priorities. Know that you'll have your story ready when the allegations come your way.

In the end, the message is clear: The time for warnings is over. The era of enforcement they promised is upon us. Dealers must act with urgency, responsibility, and a steadfast commitment to the compliance.

As professionals within the industry, we owe it to ourselves, our businesses, and customers to rise to the occasion and ensure that the trust placed in us is well-deserved. Let this be a lesson learned, not a harbinger of what's to come. Don't this opportunity go to waste.


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