Auto Lender to Pay $5.5M for Harassing Consumers for Amounts They Did Not Owe, FTC Says

Consumer Portfolio Services, a U.S. subprime auto lender, will pay more than $5.5 million under a deal with the Federal Trade Commission to settle charges that the company used illegal tactics to service and collect consumers loans.

Those tactics included collecting money consumers did not owe, harassing consumers and third parties, and disclosing debts to friends, family, and employers, the FTC said.
Consumer Portfolio Services, headquartered in Irvine, Calif., agreed to refund or adjust 128,000 consumers’ accounts by more than $3.5 million and forebear collections on an additional 35,000 accounts.
CPS will pay another $2 million in civil penalties to settle FTC charges that the company violated the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA)’s Furnisher Rule.
“At the FTC, we hold loan servicers responsible for knowing their legal obligations and abiding by them,” said Jessica Rich, director, FTC’s Bureau of Consumer Protection. “The law is very clear: Loan servicers can’t charge consumers more than they owe. And they can’t threaten and harass consumers about delinquent debts.”
The order settling the charges requires CPS to change its business practices to comply with the requirements of the appropriate laws.
In addition, the company is required “ensure the accuracy, integrity and completeness of its loan servicing processes, and the data and other information it services, collects or sells.”
CPS must also provide the FTC with periodic independent assessments of its “data integrity program” for 10 years.
According to the FTC’s complaint, CPS’s loan-servicing violations include:

  • Misrepresenting fees consumers owed in collection calls, monthly statements, pay-off notices, and bankruptcy filings;
  • Making unsubstantiated claims about the amounts consumers  owed;
  • Improperly assessing and collecting fees or other amounts;
  • Unilaterally modifying contracts by, for example, increasing principal balances;
  • Failing to disclose financial effects of loan extensions;
  • Misrepresenting that consumers must use particular payment methods requiring service fees; and
  • Misrepresenting that the company audits verified consumer accounts balances.

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