On July 18, 2023, the New York Department of Financial Services published an industry letter alerting the public that some auto lenders and auto loan servicers (“institutions”) have engaged in unfair and deceptive practices by improperly failing to credit consumers for refunds in connection with financed vehicles that were repossessed or declared a total loss….
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The Consumer Financial Protection Bureau (CFPB) ordered OneMain Financial (OneMain) to pay $20 million for failing to refund interest charged to 25,000 customers who cancelled purchases within the full refund period and for deceiving borrowers about the need to purchase add-on products to receive a loan. OneMain must pay $10 million in refunds to affected…
New Refund Requirements for Lenders Colorado Governor Jared Polis signed into law Colorado House Bill 23-1181 yesterday, June 8th, 2023. The bill, which codifies and updates various rules and requirements of GAP agreements – largely in favor of consumers – reached the Governor’s desk after passing the House on March 23, gaining Senate approval…
Regulators have begun serious examinations over how lenders have managed GAP waiver financing and their associated refunds for accounts that have terminated early. Such examinations have resulted in serious financial penalties for some financial institutions. One such example is Wells Fargo being ordered to pay $3.7B by the CFPB for violations across several product lines,…
On January 11, 2023, CFPB published a Notice of Proposed Rulemaking titled “Registry of Supervised Nonbanks that Use Form Contracts to Impose Terms and Conditions that Seek to Waive or Limit Consumer Legal Protections.” The new rule would create a registry of “covered terms or conditions” and of the non-bank companies that include those terms…
By Rick Hackett, former CFPB Assistant Director and F&I Sentinel Advisory Board Member I recently spent some time with Paul Metrey of NADA and John Culhane of Ballard Spahr discussing the FTC’s proposed rule on Add-On Products in auto finance. You can hear that discussion in Ballard’s latest podcast here. Harking back to my time…
California Gov. Gavin Newsom has now signed AB 2311 into law. By January 1, 2023 – just over three months from now – all GAP waivers sold in California must comply with the bill’s requirements. The legislation provides a number of new requirements and disclosures for GAP waivers financed in California, including a requirement for…
Federal District Court Denies Capital One’s Motion to Dismiss in Connection with GAP Waiver Lawsuit
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On August 9, 2022, the United States District Court in the Southern District of California issued an order denying Capital One’s motion to dismiss a claim against the finance company in connection with a GAP waiver amending a finance agreement Capital One took assignment of. The plaintiff in the case alleged that the GAP waiver…
A summary of a recent regulatory pronouncement in the state of Massachusetts regarding vehicle service contracts (VSCs) and the treatment of VSCs as insurance in certain circumstances. Last week the Division of Insurance in Massachusetts released a public statement regarding VSCs. The statement elaborates on the Division’s distinction between what constitutes a service contract and…