Potential Impact of Overcharging for Add-On Products on Auto Loans

May 3, 2022 |

  • Summary of recent CFPB publications regarding aftermarket products and unfair, deceptive, or abusive acts or practices relating to the same.
  • Planned features for F&I Sentinel’s FAIRRCalc to address regulatory activity.

Yesterday, the federal Consumer Financial Protection Bureau (CFPB) released a blog post titled “Overcharging for add-on products on auto loans.” The post highlights the CFPB’s focus on servicing practices involving charges for add-on products – specifically, where the charge for the add-on is rolled into the overall finance agreement and the finance agreement terminates prior to the end of the add-on product. The post is part of a surge in recent activity by the CFPB regarding add-on products, and in particular refunds in connection with such products.

Referenced in the post was the CFPB’s 2022 Spring Supervisory Highlights report, in which the CFPB identified that its examiners recently found servicers engaged in unfair practices by failing to request refunds from the third-party administrators for “unearned” fees related to GAP products and failing to apply the applicable refunds to the accounts after repossession and cancellation of the contracts. (emphasis added)

In the report, the CFPB notes that such conduct results in inaccurate deficiency balances and the reporting of those inaccurate balances to third-party debt buyers. Per the CFPB, the inaccurate balance reporting results in substantial injury to consumers because the amounts that third-party debt buyers will attempt to collect are higher than the true amount owed.

The blog post also points back to the 2019 Winter Supervisory Highlights, which discussed unfair and deceptive practices regarding refunds for add-on products. Like the latest Spring Highlights, the 2019 Winter Highlights identified that servicers were incorrectly calculating service contract refunds, resulting in unfair attempts to collect a miscalculated deficiency balance. In addition, examiners found instances where refunds for ancillary products were not requested after a repossession or total loss and deficiency notices claiming to account for refunds or that the servicer was unaware that any refunds were sent. This conduct was deceptive, according to the CFPB, because there was evidence that the servicers had not tried to obtain the refunds.


This type of activity from the CFPB, state regulators, and class action attorneys led F&I Sentinel to begin designing a solution – FAIRRCalc – to assist our customers with the aftermarket refund issue, which we believe will continue to grow. FAIRRCalc is a tool that allows you to obtain instantaneous and accurate refund quotes on GAP waivers approved for financing in your company’s F&I Sentinel database.

In addition, we have learned from several of you, as well as by reviewing regulatory pronouncements like those summarized above, that being able to trigger a cancellation directly with the F&I product company is critical. Knowing this, we have decided to incorporate a feature into FAIRRCalc that will allow the lender to trigger an electronic cancellation notice to the F&I product company (and dealer) in addition to obtaining a refund quote.

Please contact us if you would like to see a demonstration of FAIRRCalc or volunteer to beta test the software. We are always looking for input as to how best to design our tools so we can continue to address our customers’ pain points.

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