WASHINGTON — The Consumer Financial Protection Bureau has filed a lawsuit in federal court against auto-loan servicer USASF Servicing (USASF) alleging a host of illegal practices that harmed individuals with auto loans.
According to the Bureau, the practices include wrongfully disabling borrowers’ vehicles, improperly repossessing vehicles, double-billing borrowers for insurance premiums, and failing to return millions of dollars in refunds to consumers.
The CFPB said it is seeking to obtain redress for consumers and civil money penalties and stop any future violations by the Lawrenceville, Ga.-based USASF, which serviced auto loans that were originated by an affiliate, U.S. Auto Sales, Inc., which was a buy-here-pay-here auto dealer and lender with 31 dealerships in the Southeast. USASF offered both Guaranteed Asset Protection and collateral-protection insurance.
The Allegations
The CFPB is alleging that USASF:
- Illegally disabled cars. While many lenders install “kill switches” or “starter interrupters,” the CFPB is alleging USASF incorrectly disabled vehicles at least 7,500 times and caused these devices to play warning tones in vehicles over 71,000 times during periods when the consumer was not in default or was in communication with USASF about upcoming payments. USASF remotely disabled vehicles at least 1,500 times after explicitly promising consumers it would not do so, the lawsuit alleges.
- Failed to refund premiums to consumers. “USASF offered consumers Guaranteed Asset Protection, which covers some of the difference (or gap) between the amount a borrower owes on their auto loan and what the car insurance will pay if the vehicle is stolen, damaged, or totaled,” the CFPB stated. “When consumers paid off their loans early or USASF repossessed a car and charged off an account, consumers were entitled to refunds of any Guaranteed Asset Protection premiums paid in advance for periods where they would no longer have coverage. USASF failed to obtain millions of dollars in refunds from the Guaranteed Asset Protection administrator.”
- Double-billed consumers and misapplied payments. “When consumers were enrolled in collateral-protection coverage by a USASF affiliate, they were also charged for that same coverage by USASF,” according to the CFPB. “Approximately 34,000 consumers were double-charged for the insurance each billing cycle, in some cases for over a year, costing consumers millions of dollars. USASF also wrongfully applied consumers’ extra loan payments first to late fees or collateral-protection insurance instead of accrued interest. This misapplication of payments caused consumers to pay over a million dollars in interest and fees that they would not have paid if USASF had correctly applied their payments.”
- Wrongfully repossessed vehicles. The CFPB alleged USASF illegally repossessed the vehicles of some consumers who never qualified for repossession or had taken action to stop the repossession. In some instances USASF sold the vehicles that it had wrongfully repossessed.
The CFPB said it is seeking to obtain consumer redress and civil money penalties, as well as stop any future violations.
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