On October 1, 2015, the Consumer Financial Protection Bureau entered into a consent order with an indirect finance company, Westlake Services, LLC, and its auto title lending subsidiary, Wilshire Consumer Credit, LLC (collectively, “Respondents”). Westlake specializes in purchasing and servicing subprime and near-subprime auto loans. Wilshire extends auto title loans directly to consumers. Respondents agreed to pay approximately $44.1 million in cash and balance reductions to affected borrowers, pay an additional $4.25 million in civil penalties to the Bureau and implement a compliance plan subject to the CFPB’s approval.
The consent order states that Respondents violated the Fair Debt Collections Practices Act (FDCPA) and engaged in unfair, deceptive and abusive acts and practices (UDAAP) when they used a web-based program, Skip Tracy, to alter the caller ID information that call recipients saw when Respondents called borrowers. Respondents used Skip Tracy to make it appear as if the calls were coming from a third party or from a department at Westlake or Wilshire other than the collection department. For example, Respondents caused phrases such as “Pizza Delivery,” “Flower Shop,” “Concealment,” “Repo,” “Repossession Services,” or “Asset Recovery” to appear in the caller ID. When the borrower answered, the Respondents allegedly maintained the ruse that they were actually calling from the phony company appearing on the caller ID.
Respondents altered the caller ID to make it appear as if some calls originated from a family member or friend of the borrower. Respondents then attempted to trick borrowers into disclosing their locations or the locations of their vehicles. Respondents also used Skip Tracy to make it appear as though they were calling from investigative or enforcement companies, and then falsely threatened to file criminal charges. Overall, Respondents or their service providers used this process to place or to receive calls associated with over 137,000 loan documents.
The consent order adds that Respondents violated the FDCPA when they: (1) called friends and family members without consent for reasons other than learning the whereabouts of the borrower; and (2) threatening to take action against the borrowers (like repossession) that could not legally be taken or was not intended to be taken.
Respondents also allegedly violated the Truth in Lending Act by: (1) failing to disclose the annual percentage rate on certain loans in advertising or in response to oral inquiries; (2) changing the due dates on accounts or extended loan terms without consulting with the borrower; and (3) failing to explain that the revised payment schedules would cause additional interest to accrue. The collectors in fact represented that such modified schedules would have a positive effect for borrowers.
Respondents engaged in UDAAP by implicitly telling borrowers of repossessed vehicles that a partial payment towards the amount due was sufficient to cause Respondents to release the repossessed vehicle when full payment was actually required for the release. Finally, the Bureau stated that a third party repossession company that Respondents used could be liable for UDAAP arising out of statements that the repossession company made to borrowers on behalf of Respondents.
The consent order is yet another indication that the CFPB is continuing to pay attention to the auto lending industry and will use UDAAP as a tool when a substantive law does not provide a cognizable legal claim for the Bureau against auto lenders and their service providers.