Unjust? Misleading? Ruthless? Who, lenders? The Consumer Financial Protection Bureau (CFPB) sure thinks so.
The agency has released a new report which found “unfair, deceptive, and abusive acts or practices” across many consumer financial product categories. Ones that the agency feels violate federal law.
That car is worth how much? C’mon, now…
The most serious concern the CFPB may have uncovered comes from vehicle loan companies. The agency says some have originated loan balances above the actual value of the car or truck being purchased and went as far as engaging in illegal collection practices while servicing these loans.
This feeding frenzy appears to be an offshoot of the pandemic when a shortage of new and used vehicles led to unrealistic price hikes. The dominoes fell from there – larger loan amounts, higher monthly payments, and ultimately, a higher rate of loan delinquencies.
The CFPB said another hook auto lenders used was their marketing materials. Researchers found that auto lenders misled consumers about the quality of the car they were eligible for under the terms of auto loans.
In many cases, the advertised loan offers were for much larger, more expensive, and newer cars than the pictured cars.
'Multiple instances of unfair or abusive acts'
Adding to the chicanery, the CFPB’s report said that some lenders went too far in charging fraudulent interest on inflated loan balances, as well.
“Servicers charged interest on loans based on fraudulent representations by dealers that the vehicle had options and enhancements that it did not actually have,” the agency said.
“When servicers identified discrepancies, they did not reduce the amount that consumers owed on the loan agreements and continued to charge interest tied to the financing of the nonexistent options.”
In addition, the agency found instances where lenders canceled automatic payments without sufficient notice, resulting in unavoidable late fees.
One little trick servicers allegedly employed was not properly notifying consumers that the final payment of an auto loan often had to be made manually to close out the loan. And there’s nothing as unsavory as being surprised when you’re hit with late fees even though you had automatically paid your balance for years.
Medical debt comes into question, too
Unlawful debt collection attempts on medical debt is another across-the-line matter that the CFPB took issue with recently, and it’s taking another swing at it again.
For example, despite receiving sufficient information to render the debt uncollectible under state workers' compensation laws, the agency found there were debt collectors who continued to attempt to collect work-related medical debt.
“The debt collectors violated the Fair Debt Collection Practices Act by collecting an amount not permitted by law or agreement, by falsely representing the character, amount, or legal status of a debt, by engaging in conduct which had the natural consequence of harassing, oppressing, or abusing the consumer, and by using false, deceptive, or misleading representations in connection with the collection of a debt,” the agency said.
The companies behind medical debt may be formidable, but the CFPB thinks it can be just as tough and is partnering with other agencies to determine how these high costs are impacting consumers.
If you are someone impacted by medical debt in a way that you feel is unfair, calling the CFPB might help. Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).