The Massachusetts Division of Banks has ordered several fines and penalties against a number of buy-here-pay-here auto lenders — including Westlake Financial Inc.’s subsidiary Western Funding Inc. — for failure to obtain proper licensing and illegal lending practices.
Last week, the agency announced in a press release that Westlake entered into a consent order at the end of July for charging annual percentage rates (APR) greater than the state maximum rate of 21%, due to the additional financing of guaranteed asset protection (GAP) insurance. The order requires the Los Angeles-based lender to reimburse 33 consumers, waive any future charges on these consumers, and to cease lending activity at Western Funding until proper licensing is obtained.
The Division of Banks anticipates $200,000 in reimbursements to Massachusetts consumers. Westlake did not respond to Auto Finance News’ request for comment by press time.
Last year, the Massachusetts Division of Banks entered into a consent order with Westlake Financial for the same practice of charging an APR in excess of 21% when GAP insurance financing was factored in. The lender was required to stop the practice and reimburse borrowers who had been affected — but a specific dollar amount was not provided.
This wave of regulatory actions came after the Division of Banks surveyed 200 car dealerships and ultimately resulted in five enforcement actions, 135 cease directives, and $170,000 in fines and penalties.
Other lesser-known auto lenders involved in the action include Cedar Auto Sales LLC, New City Funding Corp., and State Cap Auto Finance Inc. The claims against the lenders include unlicensed lending activity, the illegal use of kill switch devices, and improper repossession practices, respectively.
