Today's Trends in Credit Regulation

CFPB Watch for Auto Dealers
By Michael A. Benoit

This month we report developments from the Consumer Financial Protection Bureau and the Federal Trade Commission.

CFPB Targets Auto Finance Companies' Collection Practices.

On October 1, the CFPB announced a consent order with Westlake Services, LLC, an indirect auto finance company, and Wilshire Consumer Credit, LLC, a wholly owned subsidiary of Westlake that offers and services auto title loans. The CFPB alleged that the companies used illegal debt collection tactics, changed the due dates or extended the terms of title loans without the customers' consent and misrepresented to customers that the changes would be beneficial, and failed to clearly disclose the annual percentage rate of title loans in their advertisements. With respect to the illegal debt collection allegations, the Bureau claimed that Westlake and Wilshire provided false caller ID information, falsely threatened to refer customers for investigation or criminal prosecution, falsely implied that customers' repossessed vehicles would be returned if the customers made a partial payment, disclosed customers' loan information to third parties, and paid a third-party repossession company to make debt collection calls to customers even though Westlake and Wilshire allegedly had no intention of repossessing the customers' vehicles.

Under the terms of the consent order, Westlake and Wilshire agreed to pay $44.1 million in redress to affected customers, as well as a $4.25 million civil penalty. In addition, Westlake and Wilshire agreed to end the allegedly deceptive debt collection practices, protect customers' private information, end allegedly unlawful advertisements, and give customers truthful information about their extensions of credit.

So We Bid a Fond Farewell to Arbitration Agreements.

To the surprise of no one, on October 7, the CFPB announced at a field hearing in Denver that it is considering proposing rules to ban consumer financial companies from using the sorts of arbitration agreements currently employed by creditors to reduce the risk of class action lawsuits. The Dodd-Frank Act required the CFPB to study the use of arbitration clauses in consumer financial markets and, to protect consumers, gave it the power to issue regulations consistent with the study's findings. The CFPB claims that its study - released last March - shows that arbitration clauses restrict consumers' relief in disputes with financial service providers by allowing companies to block class action lawsuits and that, in the consumer finance markets studied (which did not include vehicle lease and financing), few consumers seek individual relief through arbitration or the federal courts, while millions of consumers are eligible for relief each year through group settlements.

The proposed rules would not ban arbitration clauses altogether, but the clauses would have to say explicitly that they do not apply to cases filed as class actions unless and until class certification is denied by the court or the class claims are dismissed in court. The proposed rules would also require that companies choosing to use arbitration clauses for individual disputes submit to the CFPB the arbitration claims filed and the awards issued. The Bureau is considering publishing the claims and awards on its website so the public can monitor them.

Psssst! Wanna Buy Some Leads?

On October 19, the FTC announced the agenda for an October 30 workshop in Washington, D.C., "Follow the Lead: An FTC Workshop About Online Lead Generation." The FTC noted that "[l]ead generators identify or cultivate consumer interest in a product or service, and sell the consumer 'lead' information to third parties. For example, as consumers search the Internet for goods and services, they may express interest in specific topics, such as educational programs, mortgages, or small-dollar loans, and submit their personal information to the lead generator. The consumer leads sometimes contain sensitive personal and financial information that may travel through multiple online marketing entities before reaching the desired business." The day-long workshop discussed consumer protection issues raised by the practices of the lead generation industry and featured presentations and panel discussions by industry representatives, consumer groups, law enforcement agencies, and others who have expertise on these issues.

FTC (Again) Targets Advertising.

On October 20, the FTC approved final consent orders against two Las Vegas dealerships that allegedly misrepresented the cost of cars in advertising. In June 2015, TC Leadership LP, doing business as Planet Hyundai, and JS Autoworld Inc., doing business as Planet Nissan, agreed to settle FTC allegations that their ads included heavily discounted prices that were not generally available to consumers. The consent orders prohibit the dealerships from misrepresenting the cost of financing or leasing a vehicle and stating the amount due at signing without disclosing certain lease terms. The dealerships also agreed to comply with Regulation M and the Consumer Leasing Act and Regulation Z and the Truth in Lending Act's advertising requirements.

See you next month.

Michael A. Benoit is a partner in the Washington, D.C., office of Hudson Cook, LLP. Michael can be reached at 202-327-9705 or by email at

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