Abusive Acts and Practices

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Although the Fifth Circuit Court of Appeals vacated the Federal Trade Commission’s (“FTC”) Combating Auto Retail Scams Trade Regulation Rule (“CARS Rule”) on January 27, 2025, the FTC and state attorneys general continue to target the auto sales and lending industries through enforcement actions and legislation. Among those efforts, the California legislature is considering its…

For the most recent edition of Supervisory Highlights, the Consumer Financial Protection Bureau focused on examiners’ findings in the auto finance sector. Several of these practices were identified by the CFPB in prior Supervisory Highlights. Many of the CFPB’s concerns relate to trends in the marketing, sales, financing, and refunds related to add-on products like optional vehicle- or payment-protection, and to consumers’ difficulty in cancelling those products or receiving refunds. The Federal Trade Commission and state regulators also have prioritized these areas, and several states have recently passed legislation addressing add-on products (including refunds, cancellation and notification). In several of the findings, the CFPB noted that the failures related to inadequate oversight of service providers, reflecting another recurring theme in CFPB’s compliance management expectations.

The CFPB has framed many of these targeted practices as unfair, deceptive or abusive acts or practices (“UDAAP”), which is consistent with certain of the agency’s recent consent orders or suits related to auto servicing practices.

In response to the findings, the CFPB generally demanded ceasing the allegedly noncompliant practices, developing policies and procedures to ensure compliance going forward, and in some cases refunding amounts to consumers.

Motor vehicle dealers, auto finance companies, servicers and secondary market purchasers of auto loans should take note of these highlighted practices when evaluating their policies and procedures.Continue Reading CFPB Supervisory Highlights Target Certain Auto Lending and Servicing Practices

Mayer Brown is pleased to provide the latest edition of its UDAAP Round-Up. This newsletter is designed to provide readers with a periodic resource to stay abreast of federal activities regarding the prohibition on unfair, deceptive, or abusive acts or practices in the consumer financial services space. In this edition, we cover notable policy…

Mere days before Halloween, California enacted California Senate Bill 666, imposing a set of restrictions on the fees that commercial financers may charge their small business customers. Signed by the governor on October 13, the legislation marks an escalation of the state’s regulation of commercial financing. What began as a disclosure-based regime with California’s…

Please check out the latest edition of our UDAAP Round-Up — a periodic review of federal activities regarding the prohibition on unfair, deceptive, or abusive acts or practices (“UDAAPs”) in the consumer financial services space. In this edition, we cover notable policy, enforcement, and supervisory developments from October 2022 through March 2023

Pennsylvania Attorney General Michelle Henry just announced an $11 million settlement with a rent-to-own provider resolving allegations of deceptive and predatory financing practices. The May 15, 2023, settlement, which is awaiting court approval, resolves allegations that Snap Finance LLC and its affiliates (“Snap”) disguised the nature of financing products it offered, concealed outstanding balances, engaged in deceptive collection practices, and used a web portal that allowed retailers to sign consumers up for financing without their knowledge, among other claims.Continue Reading Pennsylvania Targets Rent-to-Own Company Over Practices

The CFPB marketed its latest set of supervisory highlights as the “Junk Fees Special Edition.” The splashy headline is consistent with the agency’s recent focus on fees that it asserts are hidden from the competitive process. In speeches, press releases, and blog posts (and now a single proposed rule), the CFPB has stressed its growing concern with “junk” fees. The CFPB even created a section of its web site solely devoted to press releases on “junk” fees.

Gleaning compliance guidance from Supervisory Highlights is not always straightforward, as they do not provide full details. However, in this Special Edition, the CFPB notes that it has characterized the following types of fees and practices as junk:

Deposit Accounts

  • Overdraft Fees – specifically, those charged when the consumer had a sufficient balance when the financial institution authorized the transaction, but not at the time of settlement.
  • Multiple Non-Sufficient Funds Fees for the Same Transaction.

Auto/Title Financing

  • Late Fees that Exceed the Credit Contract or After Acceleration/Repossession.
  • Estimated Repossession Fees that Greatly Exceed Average Costs – even if the excess was refunded.
  • Payment Processing Fees – specifically, those that exceed processing costs, when free payment options are only available for checks or ACH transfers.
  • Fees to Retrieve Personal Property from Repossessed Vehicles – the CFPB said such fees were “unexpected” and unfair.
  • Premature Repossession and Related Fees – charging late fees and repossessing vehicles before title loan payments became due.

Mortgage Loan ServicingContinue Reading CFPB Junk Fees Special Edition

Just into the new year, the FTC notched its first success in a creative theory to extend its monetary penalty authorities, which the Supreme Court trimmed back last year.  In FTC v. RCG Advances, the FTC settled allegations that a small-business financing firm and its principals violated Section 521(a) of the Gramm-Leach-Bliley Act. Originally…

A district court has dismissed a challenge to the Consumer Financial Protection Bureau’s (“CFPB”) repeal of the underwriting provisions of its 2017 payday rulemaking. The CFPB’s payday lending rule has a long and tortured history. First promulgated in 2017, the rule had two main prohibitions—a prohibition on making payday loans without assessing a borrower’s ability…

On October 19, 2021, the Consumer Financial Protection Bureau (“CFPB”) issued its first enforcement action under newly-confirmed Director Rohit Chopra, taking aim at a company that the CFPB found to misuse its position of market dominance. The nature of the CFPB’s claims and the manner in which they were presented is telling of the CFPB’s likely approach to enforcement under Chopra. The agency issued a consent order against JPay, LLC, which the order describes as a company that contracts with federal, state and local departments of corrections (“DOCs”) around the country to provide various products and services, including debit cards provided to individuals upon their release from incarceration. The debit cards may contain the consumer’s own funds from commissary or other accounts and may also contain Gate Money—funds provided by the government to the individual to help ease the transition upon release from incarceration. The consent order focuses on the company’s practices related to such debit cards.
Continue Reading Chopra Makes a Statement About Markets (Both Literally and Figuratively)