Bank of America, Freedom CU, West Aircomm FCU named in repo complaints

Pennsylvania courts are cracking down on repossession-related offenses, as evidenced by a trio of recent cases. Earlier this month, Freedom Credit Union — without admitting wrongdoing — agreed to pay $1.7 million to resolve claims that it failed to provide Pennsylvania customers with proper repossession and deficiency notices and to forgive $2.73 million in disputed deficiency balances. Combined, the $4.43 million settlement amounts to 11.3% of the Springfield, Mass.-based credit union’s auto loan portfolio at yearend 2022, according to an Auto Finance News analysis of the credit union’s call report. The lawsuit, filed in Philadelphia County Court, claimed that Freedom Credit Union violated Pennsylvania’s Uniform Commercial Code (UCC) by failing to send proper post-repossession disposition notices and explanations of deficiency balance calculations to borrowers between mid-2015 and mid-2021. [caption id="attachment_58331933" align="alignnone" width="1920"] © Can Stock Photo / appalachianviews [/caption] Specifically, the lawsuit contended that the credit union’s repo notices included un-incurred storage charges, which allegedly misled borrowers about the cost to redeem their vehicles. Similarly, the lawsuit alleged that the credit union’s deficiency notices failed to provide the statutorily mandated explanation of how deficiencies were calculated. The average deficiency balance in the case is $9,121. Under the terms of the settlement, Freedom is required to request that credit reporting agencies remove settled loans from the auto loan histories of the 422 affected borrowers. The settlement’s final approval hearing is scheduled for Sept. 14. Class-action status considered Meanwhile, a lawsuit filed against Bank of America is one step closer to being named in a class-action following a ruling by a Pennsylvania district court that the bank’s repo notices failed to comply with the state’s Motor Vehicle Sales Finance Act (MVFSA), thereby violating the Pennsylvania UCC. The plaintiffs in the case, called Nelson v. Bank of America , alleged that the bank failed to provide the requisite 15 days’ notice of borrowers’ right to redeem their vehicles. The bank argued that violations of the MVFSA are not governed by the UCC. But the district court relied on a 1985 Pennsylvania Superior Court decision that held that both statutes were applicable because they both related to the sale of the repossessed vehicle. Based on this reasoning, the district court stated that “inasmuch as the notice provisions of the MVFSA and the UCC apply to repossession and resale after default on a motor vehicle sales installment contract, it follows that the remedies available under the UCC for violation of these notice provisions are likewise available for violation of other provisions of the MVFSA.” The plaintiffs defined the lawsuit’s “class” as Pennsylvanians who financed vehicles with Bank of America — or whose auto loans were subsequently assigned to the bank — and then their vehicles were repossessed from 2016 onward. The lawsuit sizes the class as having “many members,” making it “so numerous that the joinder of all members is impractical.” On a smaller scale, West-Aircomm Federal Credit Union agreed in April to pay $300,000 to resolve claims it failed to properly inform borrowers of their rights after their vehicles were repossessed. The Beaver, Pa.-based credit union denied wrongdoing. CFPB applying more scrutiny While these three cases are confined to the courts, the Consumer Financial Protection Bureau has been stepping up efforts to collect auto loan servicing data to ensure that “markets for consumer financial products and services are fair, transparent and competitive,” the agency announced in February. To that end, the CFPB asked nine “large” lenders to provide it with data about the average number of days past due before a vehicle is repossessed and the length of time consumers have paid on their loans before vehicles are repossessed. Additionally, the CFPB has been investigating the post-repossession impacts for borrowers and lenders, including gathering data on the breakdown of fees charged to consumers for recovery, towing, storing, reconditioning, personal property and other fees. Consumers are increasingly sounding off about repos. Specifically, consumers in the first half of 2023 filed 1,371 complaints with the CFPB about lender efforts to repossess or disable their vehicles and deny their requests to lower payments, up from 559 in the first half of 2022. On a percentage basis, the ratio of this type of complaint rose to 21% of the total from 14%. As delinquency and default rates climb in the coming months, lawmakers and regulators will likely intensify scrutiny of repo procedures at banks and credit unions nationwide. Auto Finance Summit, the premier industry event for auto lending and leasing, returns October 29-31 at the Bellagio Las Vegas. To learn more about the 2023 event and register, visit autofinance.live / afs / .

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