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On October 13, 2020, the CFPB published its Consent Order with Nissan Motor Acceptance Corporation (“NMAC”). The Consent Order identifies the following violations of law by NMAC: (1) wrongful repossessions of vehicles despite agreements with consumers; (2) repossession agents failing to return personal property unless the consumer paid fees; (3) depriving consumers from making payments by phone through a lower cost option; and (4) making deceptive statements in its agreement to modify consumer’s auto loans. Under the Consent Order, NMAC will pay civil penalties of $4,000,000.00, plus damages to consumers that is yet to be determined.

The wrongful repossession violations arose in this matter because NMAC informed the consumer that NMAC would not repossess their vehicle if the consumer paid the delinquency under 60 days past due; consumers made a promise to pay and the date of the promise had not yet passed; or entered into an extension agreement with the consumer but violated the agreement. According to the Consent Order, NMAC repossessed hundreds of vehicles where the loan was less than 60 days past due; the consumer either had kept a promise to pay or made a promise to pay in the future and that future date had not yet passed; or repossessed after an agreed extension with the consumer. The CFPB found these actions by NMAC to be unfair acts and practices in violation of Federal law.

As you consider this Consent Order, evaluate whether your policies and procedures are clear enough to avoid a wrongful repossession claim. For instance, is your staff trained to avoid making misrepresentations about when repossession will start? Do you audit accounts to make sure that policies and procedures are being followed by your staff? Clearly, NMAC failed to take these steps and evaluate its repossession procedures.

The second issue involves repossession agents holding personal items left in the vehicle and refusing to return such personal items unless the consumer paid a fee or costs. The issue of holding personal property and refusing to release it unless fees and costs are paid was previously addressed by the CFPB in earlier guidance. The CFPB found this practice to be an unfair acts and practices in violation of Federal law.

Note that NMAC was guilty as the result of the actions of its repossession agents. Again, ask yourself: do you know what your repossession agents are doing and whether they complying with the law? How do they handle personal property found inside repossessed collateral? The answers to these questions are important if you wish to avoid violating applicable law.

The third issue involves disclosures of fees and advising consumers of all their options when making payments by phone. NMAC charged different fees depending on whether the payment by phone was by electronic check or in-network debit card versus credit card payments or out-of-network debit-card payments. The CFPB found that none of the consumer disclosures contained information about the fees for the telephonic payments or the price differences between the available options. Furthermore, the CFPB found that consumers were not made aware of the cost of such fees nor informed about the difference of the fees. Again, the CFPB found that these practices violated Federal law.

You should ask yourself here: what disclosures are given to members regarding fees related to pay by phone? Are there written disclosures as well as verbal disclosures? What do our policies or procedures provide? Are staff properly trained on what is required as far as disclosures?

Finally, the CFPB found that NMAC violated Federal law by engaging in deceptive acts related to loan extension agreements. The extension agreement in place contained the following language:

As a condition of you making this request, you represent that you have not filed and agree that you will not file for bankruptcy protection within 120 days after the date of this correspondence, and that any extension is contingent upon the absence of any such filing. If you should so file for bankruptcy protection, then this agreement is void for misrepresentation, and we may seek repayment of the extended payments as originally scheduled and may deem such payment to be in default.
The CFPB found that this language created an impression that consumers could not file bankruptcy. The CFPB found that the agreement to waive an individual’s right to file bankruptcy is void as against public policy.

Ask yourself: has our extension and workout documentation been reviewed by an attorney? Is there anything in the documentation which could be deemed a misrepresentation or deceptive act?

This Consent Order is a good reminder to review your repossession policies and procedures to make sure your Credit Union is not engaging in similar behavior. In addition, you want to make sure your staff is properly trained and that there is some appropriate auditing of staff to make sure those policies and procedures are being followed. We work with our clients to review their policies and procedures, to train their staff and to help them audit their staff work to find problems and fix them before a regulatory or consumer lawyer discovers the issues.

If you have questions about the Consent Order or questions about your own practices as they relate to the Consent Order, please do not hesitate to contact me or another lawyer at SVL.