CFPB Orders Company To Pay $ 1.5 Million For ‘Misleading’ Loan Payment Disclosures
The Consumer Financial Protection Bureau has ruled that clients of a Texas business should be paid up to $ 7.5 million for allegedly misleading claims about an auto loan payment service, but in a twist the CFPB could end by paying the bulk of the refund.
The CFPB issued the order this week against SMART Payment Plan LLC, but determined that the Austin company only had to pay $ 1.5 million in redress – because the company couldn’t afford more than that – and a fine. civil $ 1. The nominal fine allows the CFPB to compensate aggrieved consumers for the remainder of what is owed to them from the pre-existing resources of the agency’s civil sanctions fund.
The consent order, released on Monday, said that if the final restitution amount is less than $ 7.5 million, the office will send the difference to the Treasury Department.
The CFPB alleged that the SMART Payment service claims to allow consumers to pay off their auto loans faster by making automatic partial payments corresponding to a customer’s paycheck. By paying biweekly rather than monthly, a customer could make 13 monthly payments per year, or a full additional payment, on their car loan. The company charged a membership fee of $ 399 and a bi-weekly debit fee of $ 1.95 to consumers enrolled in its car loan payment accelerator service.
The bureau says the company marketed the plan “as a financial benefit to consumers, however, [the company] was aware that during the relevant period, the vast majority of its consumers ended up paying more in total on their loans by taking out the Smart Plan.
The CFPB said the company sent individual “benefit summaries” to clients from 2012 to 2015 that claimed to indicate specific interest savings or other savings resulting from joining the plan, but that the fees “would exceed normally the savings ”.
“SMART’s disclosures thus created the misleading impression that consumers would save money by using its product,” the office said in a press release.
The office said most of the company’s customers left the service before the end of their loan term, which resulted in customers “not even receiving the deceptive benefit amounts promised.”
David Engelman, CEO of SMART Payment, said he was happy with the settlement after a four-year investigation.
“After a thorough and rigorous investigation, the only complaints from the CFPB were for documents used from 2012 to 2015 that had previously been approved by state regulators,” Engelman said in a statement. “Although SMART vigorously disputes the Bureau’s complaints, SMART has found it preferable to settle the complaints against the old documents.”
The consent order prohibits the company from making inaccurate statements about its payment programs. It also requires SMART Payment to account for the total costs of its programs.