On February 28, 2022, the CFPB issued a compliance bulletin regarding repossession of vehicles, and the potential for violations of the Dodd-Frank Act’s prohibition on engaging in unfair, deceptive, or abusive acts or practices when repossessing vehicles. This is after the CFPB observed, during its examinations and enforcement actions, illegal seizure of cars, sloppy record keeping, unreliable balance statements, and ransom for personal property.
According to the CFPB, the recent months have shown extremely strong demand for used automobiles. Since repossessed automobiles can command higher prices when resold, the CFPB is concerned that these market conditions may promote risky auto repossession practices.
To mitigate the risk of wrongful repossessions, the Bureau is taking action against illegal repossessions and sloppy servicing of auto loans and intends to hold loan holders and servicers accountable for UDAAPs related to the repossession of consumers’ vehicles. In its bulletin “Mitigating Harm from Repossession of Automobiles”, the CFPB highlights relevant examples of conduct observed during supervisory examinations or enforcement investigations that may violate Federal consumer financial law. These include:
Illegally seizing cars: Servicers are repossessing vehicles from borrowers who made payments sufficient to stop the repossession or who entered a payment plan. Given the high level of harm caused by wrongful repossessions, servicers must ensure that every single repossession is valid.
Sloppy record keeping: Incorrectly coded records or agents failing to talk to their colleagues about canceling repossession orders hurts consumers and is a violation of federal law. Servicers need to ensure proper communication between them and any third-party processing a repossession.
Unreliable balance inquiries: Inaccurate balances can lead to a borrower paying less than a sufficient amount to avoid delinquency, resulting in a repossession. People are also having their vehicles repossessed because their loan payments are processed in a different order than what they had been told.
Ransom for personal property: Servicers are still holding personal property found in repossessed vehicles hostage until the property owner pays a fee, a practice the CFPB has been cracking down on for years.
The CFPB assured that it will continue to review closely the practices of entities repossessing automobiles for potential UDAAPs, including the practices described above, and will use all appropriate tools to hold entities accountable if they engage in UDAAPs in connection with the said practices.
Read the CFPB’s full release here.
The compliance bulletin can be found here.