The CFPB has announced that it has entered into a consent order with a Colorado buy-here pay-here used car dealer to settle charges that the dealer’s sales and advertising practices violated the Truth in Lending Act and the Consumer Financial Protection Act prohibition of unfair, deceptive, or abusive acts or practices. The consent order requires the dealer to pay $700,000 in restitution and imposes a civil penalty of $100,000 which is suspended based on the dealer’s inability to pay.
The dealer offered financing to car purchasers through retail installment contracts (RIC) and assigned the majority of such RICs to an affiliate. (Perhaps wanting to send a signal that even small companies are not below its radar screen, the CFPB noted in its press release announcing the consent order that during the relevant time period, the dealer “offered financing to about one thousand people each year.”) According to the consent order, the dealer violated TILA by engaging in the following conduct:
- Failing to include the costs of a required repair warranty contract and payment reminder device in the disclosed finance charge and APR
- Failing to include markups paid by credit customers in the disclosed finance charge and APR (The CFPB claimed that the markups resulted from the dealer’s policy of negotiating the sales price with customers paying cash but not with customers entering into RICs.)
- Advertising inaccurately low APRs as a result of failing to include the costs of the required repair warranty contract and payment reminder device and the markup in the finance charge
The CFPB claimed that the TILA disclosure violations also constituted deceptive acts and practices that violated the CFPA UDAAP prohibition. In addition, the CFPB claimed that the dealer’s failure “to post sticker prices or otherwise reveal the asking prices of cars offered to consumers until after consumers indicated they would purchase a car” coupled with the TILA disclosure violations constituted abusive practices in violation of the UDAAP prohibition. According to the CFPB, these practices “left consumers unable to protect their interests in selecting or using the credit transactions” offered by the dealer.
In addition to requiring the payment of restitution and imposing a suspended civil penalty, the consent order requires the dealer to “clearly and prominently post a purchase price on all automobiles available for sale” and provide consumers with a written disclosure containing certain specified information “that would apply in the event that the consumer financed the purchase of the automobile at the terms offered by the [dealer]-prior or simultaneous to [dealer’s] offering a specific automobile to the consumer or in any way soliciting a commitment from the consumer to purchase from the [dealer].” Such information includes: the duration of the RIC; the timing, number and dollar amount of periodic payments; the total number of payments required to obtain full ownership; an itemization of additional products to be included in the financing; and the purchase price, finance charge and APR if the dealer offers financing. The dealer must obtain the consumer’s signed acknowledgment that the disclosure was received.
The consent order is not binding on other buy-here pay-here car dealers. Nevertheless, we would not be surprised if the CFPB were to view the new written disclosure required by the consent order as something other buy-here pay-here dealers should be providing to consumers even though the disclosure is not required by TILA or other federal law.