WASHINGTON—Following a blog post in which the CFPB shared concerns over the potential for mounting repossessions, the Bureau said it is now moving to thwart illegal repossessions in the “heated” auto market.
According to the CFPB, its new compliance bulletin reveals conduct observed during Bureau examinations and enforcement actions, including the illegal seizure of cars, sloppy record keeping, unreliable balance statements, and ransom for personal property.
“With today’s high car prices, auto lenders and investors might be tempted to seize vehicles for resale in the hot used car market,” said CFPB Director Rohit Chopra. “No American ever wants to wake up to see their car stolen. Auto loan servicers need to ensure that every repossession is lawful.”
In announcing the planned scrutiny the CFPB said it is concerned market conditions might create incentives for risky auto repossession practices, since repossessed automobiles can command higher prices when resold.
The CFPB said it also expects that both the total amount of debt and the average loan size will continue to increase. “Even when inventory shortages abate, larger car loans will put pressure on household budgets for much of the next decade,” the Bureau said.
Can Be ‘Devastating’
The CFPB added that the timing of auto repossessions often comes as a surprise to borrowers and can cause devastating injury by depriving borrowers of the use of their vehicles.
“In addition, many people experience emotional distress when a car is taken from them, lose personal property, miss work or lose their job, incur expenses for alternative transportation, pay repossession-related fees, experience negative credit reporting, and have to repair vehicles damaged during the repossession process,” the CFPB said.
To head off the risk of wrongful repossessions, the Bureau said it is taking action against illegal repossessions and “sloppy” servicing of auto loans. The bulletin describes instances, in examinations and enforcement actions, where servicers violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition against unfair, abusive, or deceptive acts and practices.
Practices Being Scrutinized
Among the practices it said it is scrutinizing:
- 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.”
Closely Watching
The CFPB added that is closely watching the auto lending market. Auto loans are already the third largest consumer credit market in the United States at over $1.46 trillion outstanding, double the amount from ten years ago.