On February 2, the Massachusetts Attorney General announced that her office entered into an assurance of discontinuance with an auto loan provider to settle allegations of certain illegal auto loan collection practices. Specifically, the Massachusetts AG alleged that, beginning in 2017 and continuing to the present day, the auto loan provider allegedly failed to give borrowers adequate information relating to the calculation methods for deficiencies left on their auto loans after their vehicles were repossessed. The Massachusetts AG further alleged that the auto loan provider engaged in a pattern of excessive collection calling to borrowers in violation state debt collection regulations, which prohibit the initiation of more than two collection communications during a seven-day period.
Pursuant to the settlement, the auto loan provider must pay more than $7.6 million, including a $2.1 million fine and approximately $5.5 million in debt relief for more than 500 eligible borrowers across the state of Massachusetts. This settlement follows two other recent enforcement actions taken by the Massachusetts AG against auto lenders in recent years. Together, these three enforcement actions have resulted in over $40 million in aggregate settlement payments.
Putting it into Practice: This settlement should be viewed in the context of a broader nationwide regulatory probe into auto finance operations that continues to sharpen. Several other state authorities have initiated similar enforcement actions against auto finance companies in recent months for alleged failures to refund unearned GAP fees, misrepresentations of costs in auto loan agreements, and other deceptive auto lending practices (see previous blog posts here and here). Likewise, federal consumer finance regulators have repeatedly made clear that their attention is turned to ensuring that auto finance companies remain compliant with federal fair lending and debt collection regulations (see previous blog posts here, here, and here). Auto finance companies should there be aware of the increased regulatory focus on fair auto lending and fair servicing and should consider implementing some of the best practices recommended by the CFPB (available here) or risk becoming the subject of a similar supervisory examination.