CFPB issues compliance bulletin aimed at thwarting illegal automobile repossessions

At the end of February 2022, the Consumer Financial Protection Bureau (CFPB) released a compliance bulletin regarding the potential for illegal automobile repossessions, in violation of the Dodd-Frank Act’s prohibitions against unfair, deceptive, or abusive acts or practices (UDAAPs).  The bureau noted the COVID-19 pandemic’s effect on the auto market, which lead to markedly increased demand (and prices) for used vehicles.  Based on the high demand for used vehicles, the CFPB “is concerned that these market conditions might create incentives for risky auto repossession practices, since repossessed automobiles can command these higher prices when resold.”  To that end, the bureau published its guidance as a reminder of the potential UDAAP pitfalls that may arise in the repossession process.

Before moving into the content of the bulletin, I’d like to note that, in general, the actual repossession process is governed by contract law, as the right to repossess a vehicle arises from the contract (governed by state law) and the security interest lenders receive in exchange for the loan.  This post will not get into the specifics of how a credit union can or should repossess a vehicle; instead, it will discuss what a credit union can do to avoid UDAAPs during the process.

The CFPB opens the substantive portion of its compliance bulletin with a section on UDAAPs, and provides brief explanations of “unfair,” “deceptive,” and “abusive” acts or practices.  For a more in-depth look at UDAAPs, NAFCU published an Issue Brief on the topic in May 2021 that is worth the read.  The bureau then proceeds to provide examples of unfair, deceptive, and abusive acts or practices it has found in automobile repossessions.  The CFPB state that it “intends to hold loan holders and servicers accountable for UDAAPs related to the repossession of consumers’ vehicles.”

 

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