The CFPB took its first action against a “buy-here, pay-here” car dealer. The Dodd-Frank Act established that companies’ practices can be unfair if consumers cannot reasonably avoid being harmed and granted authority to the CFPB to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices.
The CFPB has determined that the buy-here, pay-here dealer violated federal consumer financial laws and harmed consumers through illegal actions, such as harassing borrowers at work, harassing borrowers’ references, providing inaccurate repossession information to credit reporting agencies, failing to properly handle credit information furnishing disputes and failing to implement reasonable procedures to ensure the accuracy of consumers’ credit information.
Buy-here, pay-here means that the dealer sells the car as well as originates and services the auto loan. This particular dealer operates 117 dealerships in 20 states and, as of December 31, 2013, held more than 150,000 outstanding auto installment contracts. Generally, at least 45% of the dealer’s auto installment contracts were delinquent at a given time. At the end of 2013, the dealer had approximately 69,000 installment contracts past due.
The dealer must pay $8,000,000 as a civil money penalty, end its unfair debt collection tactics, fix its credit reporting practices and arrange for harmed consumers to obtain free credit reports.