CFPB acts to halt illegal automobile repos

Rising used-vehicle values, affordability concerns and mounting auto loan debt have caught the attention of the Consumer Financial Protection Bureau (CFPB), which indicated last week that it would zero in on illegal repossession activity as part of its heightened focus on unfair, deceptive or abusive acts or practices spurred by the economic fallout of the COVID-19 pandemic. Specifically, the Bureau is concerned that current market conditions might create incentives for auto lenders to repossess consumers’ vehicles, according to the regulator’s Feb. 28 bulletin. “With today’s high prices, auto lenders and investors might be tempted to seize vehicles for resale in the hot used-car market,” CFPB Director Rohit Chopra said in a statement. “No American ever wants to wake up to see their car stolen. Auto loan servicers need to ensure that every repossession is lawful.” As repossession rates begin to tick up in the second quarter of 2022, lenders need to be aware that the CFPB will take a close look at their repossession methods, Kenneth Rojc, managing partner at Nisen & Elliott , told Auto Finance News. The CFPB will closely monitor creditors and lenders who are returning to more normal repossession practices post-pandemic to ensure they have boundaries in place. For example, rather than seizing a vehicle immediately following default, servicers often give consumers an opportunity to avoid repossession by making a payment plan, according to the CFPB. However, if the timing of the repossession comes as a surprise to borrowers, damages could include emotional distress, loss of personal property, missing workdays or even losing a job. “There’s generally a cure period or some additional notices before [lenders] would repossess, and that’s something the CFPB will be looking for,” Rojc said. The CFPB will monitor potential illegal repossession activities, including the wrongful seizure of cars, sloppy recordkeeping, unreliable balance statements and "ransom" for personal property, according to the bulletin. In those instances, lenders would be in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Lenders should also keep in mind that, along with federal scrutiny, all 50 states will be involved in this action too, Rojc said. “Every state examiner will have this on their examination screens, including repossession servicing, debt collection servicing, credit reporting, the fees you are charging — that whole array comes into play,” he added. Auto Finance Risk Summit, the premier event for risk and compliance management in auto finance, returns April 25-26 in San Diego. This event is the central resource for education and networking focused on best practices in risk management and will prepare your team for the dynamics of the evolving auto finance market. To learn more about the 2022 event and register, visit www.AutoFinanceRiskSummit.com .

CFPB acts to halt illegal automobile repos

Lenders could be motivated to repossess overvalued vehicles for resale, Rohit Chopra said

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