The Consumer Financial Protection Bureau today released a report on its findings about allegedly illegal practices in auto finance, such as deceptive advertising about loan terms and misapplying loan payments. The report also covers what the bureau described as a “trend of significant violations” related to auto finance add-on products.
The CFPB’s supervisory highlights report covers the bureau’s findings in examinations related to auto finance from late 2023 and August 2024. Among the findings, lenders engaged in deceptive acts or practices when they mailed prescreened advertisements marketing rates “as low as” specified APR rates to consumers who in fact had no reasonable chance of qualifying for or being offered rates at or near that level, the CFPB said. Lenders and servicers also engaged in potentially illegal acts when they erroneously repossessed vehicles, repossessed a third party’s vehicle without a valid lien, applied borrowers’ auto-loan payments in a manner that led to late fees, or did not provide vehicle titles in a timely manner after a loan payment, lease buyout or transfer to a different state.
As for third-party products, the CFPB cited several practices that it concluded were potentially illegal, such as collecting and retaining amounts for optional add-on products that consumers did not agree to purchase.
“Auto-finance companies profit from these products through the original cost, the finance costs over the life of the loan, and, in some cases, from the failure to ensure refunds when consumers can no longer use the products,” according to the report. “Although add-on products may benefit some consumers, examiners have identified unfair, deceptive, and abusive acts or practices throughout the lifecycle of add-on products.”
