Security National Automotive Acceptance Company (SNAAC) -- an auto loan company -- is being accused of using a combination of illegal threats and deceptive claims in order to collect debts from servicemembers.
The Consumer Financial Protection Bureau (CFPB) has filed a complaint in federal court seeking compensation for harmed consumers, a civil penalty, and an order prohibiting the company from committing future violations.
“Security National Automotive Acceptance Company took advantage of military rules to put enormous pressures on servicemembers to pay their debts,” said CFPB Director Richard Cordray. “For all the security they provide us, servicemembers should not have their financial and career security threatened by false information from an auto loan company.”
Unfair, deceptive and abusive practices alleged
SNAAC, an Ohio-based auto finance company that operates in more than 2 dozen states, lends money primarily to active-duty and former military to buy used motor vehicles.
The CFPB claims the company violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair, deceptive, and abusive acts and practices by using aggressive collection tactics that took advantage of servicemembers’ special obligations to remain current on debts.
Both active-duty and former servicemembers could encounter trouble with the company if they missed or were late on payments. Once consumers defaulted, they became subject to repeated threats to contact their chain of command. In many other instances, the company exaggerated the consequences of not paying. Thousands of people were victims of the company’s aggressive tactics.
The CFPB alleges that the company has:
- Exaggerated potential disciplinary action that servicemembers would face: The company told customers that their failure to pay could result in action under the Uniform Code of Military Justice, as well as a number of other adverse career consequences, including demotion, loss of promotion, discharge, denial of re-enlistment, loss of security clearance, or reassignment. In fact, these consequences were extremely unlikely.
- Contacted and threatened to contact commanding officers to pressure servicemembers into repayment: The company would repeatedly contact commanding officers to disclose the debts in an effort to force payment, and suggest that the servicemembers were in violation of military law and other regulations. These company’s tactics, the CFPB claims, took advantage of the servicemembers’ inability to protect their interests in their transactions with the company and was unfair.
- Falsely threatened to garnish servicemembers’ wages: The company implied to consumers that it could immediately commence an involuntary allotment or wage garnishment. But such consequences could not or would not occur because -- through the military pay system -- involuntary allotments are only processed once a judgment by a court is obtained. The company would threaten to pursue an involuntary allotment before they had even determined whether the servicemember would be sued.
- Misled servicemembers about imminent legal action: In many instances, the company threatened to take legal action against customers when, in fact, it had not determined whether to take such action. In fact, in numerous instances, the company did not intend to take such action at the time.
Through its lawsuit, the CFPB seeks to stop the alleged unlawful practices of the company. It has also requested that the court impose penalties on the company for its conduct and require that compensation be paid to consumers who have been harmed.
The complaint is not a finding or ruling that the company has actually violated the law.