On Wednesday, the New York Department of Financial Services (DFS) became the first state financial regulator to use the Dodd-Frank Act’s “UDAAP” consumer protection standards against a corporation when it filed a lawsuit against an auto lender. The 2010 Dodd-Frank Act gives state regulators the ability to sue companies for engaging in unfair, deceptive, or abusive acts or practices (UDAAP).
The DFS filed suit against Candor Capital Corporation, which acquires and services subprime car loans. The DFS also named Candor’s owner, Stephen Baron, as a defendant in the suit. DFS alleges that the company engaged in a practice of wrongfully retaining consumers’ positive credit balances and concealing these balances from the customers and regulators. The DFS claims that Candor Capital and Baron have misappropriated millions of dollars from consumers since the company’s inception.
In addition to its UDAAP claim under the Dodd-Frank Act, DFS also asserts state law claims. The DFS’ lawsuit, combined with a first ever lawsuit by a state attorney general exercising Dodd-Frank UDAAP enforcement powers, may prove to be a bellwether, showing the way for state regulators to make increased use of their expanded consumer protection enforcement powers under Dodd-Frank.