Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Automobile lender to pay $5.5 million to settle FTC charges, (May 29, 2014)

By Greg Hammond, J.D.

Consumer Portfolio Services, Inc. (CPS), a national subprime automobile lender, has agreed to pay over $5.5 million in settlement of charges that it utilized illegal tactics to service and collect on consumers’ loans. The government alleged in its complaint that CPS collected money that consumers did not owe, harassed consumers and third parties, and disclosed debts to consumers’ employers, family, and friends in violation of the FTC Act and other laws (U.S. v Consumer Portfolio Services, Inc., FTC File No. 1123010, Case No. SACV14-00819 ABC (RNBx)).

“At the FTC, we hold loan servicers responsible for knowing their legal obligations and abiding by them,” stated FTC Bureau of Consumer Protection director Jessica Rich. “The law is very clear: Loan servicers can’t charge consumers more than they owe. And they can’t threaten and harass consumers about delinquent debts.”

The FTC’s complaint challenged the following conduct:

• Misrepresentations about fees, amounts owed, and that audits verify the accuracy of those amounts;

• Deceptive reasonable basis claims regarding the amounts consumers owed;

• Unfair assessment and collection of fees or other amounts;

• Unfair modifications of retail installment sales contracts;

• Deceptive failure to disclose effects of an extension, such as an increase in principal balance;

• Deceptive claims about required payment methods that charges consumers additional service fees;

• Unfair collection practices; and

• Deceptive Collection practices.

In agreeing to the stipulated order for permanent injunction and civil penalty judgment, CPS will be required to refund or adjust 128,000 accounts by over $3.5 million and to forbear collections on 35,000 other accounts, in settlement of charges the company violated the FTC Act. In addition, CPS will need to pay $2 million in civil penalties to settle the FTC’s charges that it violated the Fair Debt Collection Practices Act and Fair Credit Reporting Act’s Furnisher Rule. CPS will also be required to create and maintain a comprehensive data integrity program that ensures accuracy, integrity, and completeness in the company’s loan servicing processes. The company must also provide periodic independent assessments on its data integrity program to the FTC for a period of ten years.

Companies: Consumer Portfolio Services, Inc.

News: ConsumerProtection FederalTradeCommissionNews