On July 9, the CFPB
issued a
consent order against a national bank regarding its auto loans practices that allegedly violated the CFPA. According to the order, if borrowers failed to secure insurance for physical damage to their vehicles, the bank would impose its own physical-damage insurance on the vehicle, known as force-placed insurance. The CFPB alleged that from 2011 through 2019, the bank imposed insurance policies on borrowers who either consistently had their own insurance or secured required insurance within 30 days after their previous policy had lapsed. The Bureau determined that the bank’s practices of applying redundant force-placed insurance on auto loans, billing for premiums on force-placed insurance policies that had ended, and not adequately notifying consumers about the resulting increase in monthly payments due to force-placed insurance – all violated the CFPA.
Furthermore, the Bureau alleged that the bank was deceptive in informing borrowers about the time it would take to cancel force-placed insurance policies and misrepresented the total amounts owed in right-to-cure notices, leading to wrongful delinquency fees. Additionally, the bank allegedly violated the FCRA by reporting incorrect information on repossessions to credit agencies. The bank allegedly failed to properly inform customers about increases in preauthorized electronic fund transfers caused by force-placed insurance, violating the EFTA and Regulation E. As a result of these findings, the bank was ordered to adjust its practices to legal standards, compensate affected consumers, and pay a $5 million civil penalty to the Bureau.
The CFPB concurrently filed a proposed consent order in the U.S. District Court for the Southern District of Ohio to resolve allegations of the bank’s sales practices and opening fake accounts. According to the proposed order, the Bureau initiated a lawsuit against the bank in 2020 for alleged deceptive sales practices. The proposed settlement, pending the court’s approval, would mandate that the bank pay a $15 million civil penalty, provide and implement a redress plan for consumers, comply with the law, and eliminate employee incentives that encourage unauthorized account openings.
