On February 28, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a bulletin and accompanying press release, highlighting an issue that the agency has written about frequently over the past several years: inadvertent repossessions. For the most part, the bulletin reminds the industry of guidance previously issued by the CFPB in several editions of Supervisory Highlights and a 2020 consent order, but it also stands as a clear reminder that inadvertent repossessions remain one of the Bureau’s highest priorities in auto finance.

Inadvertent repossessions are those that occur in error — when a consumer has made a payment or promise sufficient to stop the repossession, but it occurs regardless. Several mistakes can cause this to happen, some of which are highlighted in the bulletin:

  • Applying a payment to the wrong account
  • Failure to process an extension/deferment
  • Failure to cancel a repossession order (or all orders, if the account is placed with more than one repossession vendor)
  • Vendor failures (recovering the vehicle, even though the order had been put on hold or canceled)
  • Failing to cancel active repossession orders when a consumer files for bankruptcy
  • Applying payments to the account in an order different from that represented in consumer communications (i.e., paying fees first, which may prevent the account from become sufficiently paid down to avoid the repossession)

The bulletin also notes instances in supervisory exams in which auto finance companies made representations to consumers about what actions would be sufficient to avoid a repossession, but those statements were inaccurate, leading to repossessions even when consumers performed the actions.

In keeping with the Bureau’s recent focus on fees, the bulletin also asserts that some repossessions were caused by auto finance companies charging “illegal fees” to consumers, but the “fees” referred to were actually force-placed insurance premiums. The Bureau further notes that some auto finance companies improperly charged insurance premiums after repossessions, and (returning to an issue that the Bureau first raised in a 2016 version of Supervisory Highlights) improperly allowed repossession agents to charge fees for the retrieval of personal property from repossessed vehicles.

Having recapped its previous guidance on the issue of inadvertent repossession, the Bureau provides a list of recommended compliance steps regarding the issue. These steps include typical measures like policies, procedures, review of customer communications and payment application processes, monitoring of repossessions and complaints, logging and root cause analysis of inadvertent repossessions, and vendor monitoring of repossession agents. However, it also notes one thing not previously featured in Supervisory Highlights: having a process to “reimburse consumers for the direct and indirect costs incurred as a result of unlawful repossessions when appropriate.” This concept of consumer restitution was present in the CFPB’s 2020 consent order on this issue, but it’s the aspect of the Bureau’s recent guidance that is probably least prevalent in the industry today, and so it merits special attention.

For the most part, the bulletin summarizes existing guidance as previously seen from the Bureau, and it confirms the kind of compliance steps adopted by many auto finance companies over the past several years. But the release of the bulletin, and the now-typical strongly worded press release comparing inadvertent repossessions to having a car “stolen” and asserting that “[a]uto loan servicers need to ensure that every repossession is lawful,” should serve as a reminder that the topic of inadvertent repossessions will remain an area of intense scrutiny by the CFPB.

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Photo of Chris Willis Chris Willis

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending…

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending them in individual and class action lawsuits brought by consumers and enforcement actions brought by government agencies.

Chris also leverages insights from his litigation and enforcement experience to help clients design new products and processes, including machine learning marketing, fraud prevention and underwriting models, product structure, advertising, online application flows, underwriting, and collection and loss mitigation strategies.

Chris brings a highly practical focus to his legal advice, informed by balancing a deep understanding of the business of consumer finance and the practical priorities of federal and state regulatory agencies.

Chris speaks frequently at conferences across the country on consumer financial services law and has been featured in numerous articles in publications such as the Wall Street Journal, the New York Times, the Washington PostAmerican BankerNational Law JournalBNA Bloomberg, and Bank Safety and Soundness Advisor.