CFPB Moves to Thwart Illegal Auto Repossessions
- Source: files.consumerfinance.gov
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Bulletin Highlights:
Auto loans are the third largest consumer credit market in the United States. At a level of $1.46 trillion outstanding, the market has doubled from ten years ago. Demand for new and used cars is extremely strong and a global chip shortage has increased the average list prices for both.
Because of these factors, the CFPB “is concerned that these market conditions might create incentives for risky auto repossession practices, since repossessed automobiles can command higher prices when resold.” It has, therefore, issued Bulletin 2022-04 to head off the risk of wrongful repossessions. Citing violations of the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition against unfair, abusive, or deceptive acts and practices in recent examinations, the Bureau found the following instances during its examinations:
- Illegally seizing cars: Servicers are repossessing vehicles from borrowers who made payments sufficient to stop the repossession or who entered a payment plan. Given the high level of harm caused by wrongful repossessions, servicers must ensure that every single repossession is valid.
- Sloppy record keeping: Incorrectly coded records or agents failing to talk to their colleagues about canceling repossession orders hurts consumers and is a violation of federal law. Servicers need to ensure proper communication between them and any third-party processing a repossession.
- Unreliable balance inquiries: Inaccurate balances can lead to a borrower paying less than a sufficient amount to avoid delinquency, resulting in a repossession. People are also having their vehicles repossessed because their loan payments are processed in a different order than what they had been told.
- Ransom for personal property: Servicers are still holding personal property found in repossessed vehicles hostage until the property owner pays a fee, a practice the CFPB has been cracking down on for years.