Lender to Pay Millions in Fines for FTC Violations

Engaging in illegal tactics in servicing customer accounts will cost one subprime auto lender over $5.5 million in fines.In recent news, The Federal Trade Commission found that Consumer Portfolio Services (CPS), a subprime auto finance lender, used a number of “illegal tactics” while servicing customer accounts and attempting to collect on consumer loans. The company will pay more than $5.5 million to settle the charges that affected over 160,000 accounts. According to the FTC’s findings, CPS was found in violation of servicing loans by misrepresenting owed fees, collecting on monies that borrowers did not owe, improper assessment and collection of fees – including making unauthorized debits from borrowers’ bank accounts and harassment of consumers.

The bad news for CPS doesn’t end there. On top of the $5.5 million, CPS will have to pay another $2 million in civil penalties for violations of the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA)’s Furnisher Rule. As part of the FTC’s findings, CPS must begin rectifying accounts and sending refunds to the affected consumers within 90 days. In addition, CPS must monitor its data integrity program and provide periodic assessments to the FTC for the next 10 years. 

According to Jessica Rich, director, FTC’s Bureau of Consumer Protection, “At the FTC, we hold loan servicers responsible for knowing their legal obligations and abiding by them.”

This discovery by the FTC puts the entire auto finance industry under the microscope.  Failure to properly communicate with customers and effectively service their accounts results in severe consequences for lenders. To avoid this trouble, a unified customer communications strategy is needed. When customers are presented with clear, consistent and compliant messaging – especially in the case of notifications involving fees and disclosures – fines and investigations such as the ones levied against CPS simply wouldn’t occur.

In addition to giving lenders the ability to manage data and content to produce relevant document output for their customers, a unified customer communication platform provides a means for borrowers to make and manage payments and efficiently self-service their accounts – as well as giving your stakeholders the power to quickly adapt to regulatory changes.

The news accounts of the FTC ruling serve as a cautionary tale for the auto finance industry. If your organization doesn’t want to arrive at the same fate, a closer look at your communications strategy may be in order.