Auto Lender to pay $3.28M for SCRA Illegal Debt Collection

collection of foreclosure feesThe Consumer Financial Protection Bureau (CFPB), with its authority under the Dodd-Frank Act to take action against companies engaging in unfair, deceptive, or abusive practices, has filed an administrative consent order against an auto lender that targeted servicemembers for illegal debt collection. The company was ordered to refund or credit approximately $2M to servicemembers as well as a $1M penalty. An independent court order also prohibits the company from using aggressive tactics, such as exaggeration, deception, and threats to contact commanding officers to encourage servicemembers into making payments.

The allegations included

  • Exaggeration of the potential impact of the delinquency on the military career of the debtor including losing rank, discharge, loss of security clearance. The CFPB found these possibilities to be extremely remote.
  • Contacting and threatening to contact commanding officers. The company had included a provision in their contracts that allowed them to do this.
  • Unbased threats to garnish military wages. This was an invalid threat without a court judgment.
  • Falsely stating that legal action was imminent when the company had not even decided whether suit would be filed.

In entering into the consent orders, the company neither admitted nor denied the allegations of the complaint.

Links to the:

CFBP Announcement

Consent Administrative Order

District Court Consent Order

CFPB’s Allegations

Attorney Roy Kaufmann serves as the Director of the Servicemembers Civil Relief Act Centralized Verification Service, located in Washington, D.C. As a recognized authority on the Servicemembers Civil Relief Act, Mr. Kaufmann has published hundreds of articles and hosted many webinars. His teachings help law firms and businesses to remain compliant with the SCRA rules and regulations so as to avoid costly fines.