CFPB takes aim at add-on products in today’s report

The Consumer Financial Protection Bureau ’s latest supervisory report released today focused on auto loan originations practices, particularly the sale of add-on products and required refunds. The special edition of the CFPB’s "supervisory highlights" report addressed select auto finance-related examinations completed between Nov. 1, 2023, and Aug. 30, 2024. The report referenced issues with “deceptive” and “misleading” advertisements of interest rate offers, "wrongful” repossessions and improper servicing practices. Ancillary products in spotlight The bulk of the report centered on the sale, cancellation and refunds of ancillary products such as guaranteed asset protection (GAP). The CFPB highlighted examinations in which it was found that subprime auto finance companies engaged in abusive acts or practices by collecting and retaining funds for optional add-on products that consumers did not agree to purchase. The bureau found that service providers on calls with borrowers did not disclose that certain add-on products had been included in refinance auto loan transactions, according to the report. “By collecting and retaining amounts for add-on products that consumers did not agree to purchase, without policies or procedures to ensure or verify that consumers authorized these purchases, servicers took unreasonable advantage of consumers’ inability to protect their interests in selecting or using a product or service,” according to the report. Companies engaged in such practices were directed by the CFPB to stop collecting and retaining funds for optional products if consumers either did not agree to buy or were not clear on the products’ cost or that they were voluntary. GAP issues The bureau also highlighted cases in which auto servicers financed GAP products that were void due to the vehicle holding a salvage title. The CFPB made it clear that companies financing auto loans with GAP products must check title histories for factors that may void certain add-on products. Other topics in the report related to add-on products include identifying the payee of optional products purchased by consumers, difficult processes for consumers looking to cancel add-ons, and proper practices for calculating and granting applicable refunds for ancillary products. Follow all the latest news from this week’s Auto Finance Summit here .

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