CFPB Continues to Take Action Against Offenders in Debt Collection Services - Two New Enforcement Actions on October 28, 2015
CFPB Takes Action Against Servicemember Auto Lender Security National Automotive Acceptance Company
On October 28, 2015, the Consumer Financial Protection Bureau (CFPB) filed an administrative order against Security National Automotive Acceptance Company (SNAAC), an auto lender specializing in loans to servicemembers.
In June 2015, the CFPB filed a lawsuit against SNAAC, which alleged SNAAC engaged in illegal debt collection practices. Specifically, the complaint alleged that when servicemembers defaulted on their auto loans, SNAAC would:
- Exaggerate the potential impacts of the delinquency, including telling consumers that if they fail to pay it could result in action under the Uniform Code of Military Justice and other adverse career consequences
- Threaten to contact the servicemembers’ commanding officers
- Threaten to garnish the servicemembers’ wages, even though such garnishment could not be commenced without first obtaining a judgment
- Threaten to take legal action against the servicemembers, even when the company had not yet decided to take any action
- Pursuant to the administrative order, SNAAC is required to:
- Identify affected consumers and provide them with credits and refunds in the approximate amount of $2.28 million, with each affected consumer receiving relief in the amount of the debt they were unlawfully pressured into paying
- Stop threating to contact servicemembers’ commanding officers
- Stop telling servicemembers that their loan defaults constitute a violation of military law
- Stop telling consumers that the company is taking legal action unless it intends to take such action
- Stop telling consumers that the company will garnish the consumers’ wages unless the company first obtains a judgment permitting such garnishment
- Pay a civil penalty in the amount of $1 million to the CFPB’s Civil Penalty Fund
The CFPB’s enforcement action against SNAAC highlights that debt collection and auto lending practices remain CFPB priorities.
View the CFPB’s administrative consent order here: http://files.consumerfinance.gov/f/201510_cfpb_consent-order-administrative-snaac.pdf.
View the CFPB’s federal district court complaint here: http://files.consumerfinance.gov/f/201506_cfpb_complaint-security-national-automotive-acceptance-company.pdf.
View the CFPB’s federal district court’s Stipulated Final Judgment and Order here: http://files.consumerfinance.gov/f/201510_cfpb_consent-order-district-snaac.pdf.
CFPB Wins Symbolic Default Judgment Against Corinthian Colleges, Inc.
On October 27, 2015, at the request of the Consumer Financial Protection Bureau (CFPB), the United States District Court for the Northern District of Illinois Eastern Division entered a default judgment against Corinthian Colleges, Inc., in the amount of $530 million.
In September 2014, the CFPB filed a complaint against Corinthian Colleges, Inc., alleging that Corinthian “lured tens of thousands of students into taking out private loans to cover expensive tuition costs by advertising bogus job prospects and career services.” In addition, the CFPB alleged that Corinthian engaged in illegal debt collection practices by trying to “strong-arm” students into paying back loans while the students were still in school.
In May 2014, Corinthian filed for bankruptcy and its assets were liquidated. As a result, the default judgment against Corinthian is largely symbolic as it will be unable to pay the judgment. Nevertheless, the CFPB’s willingness to pursue the default judgment is a sign that student loan-related consumer complaints as well as debt collection practices remain priorities for the CFPB. Indeed, the CFPB has issued numerous statements this year indicating its concern about student loan-related services and products and its intent to “halt harmful practices and boost assistance for distressed borrowers.” In addition, the CFPB has initiated numerous enforcement actions related to debt collection practices. As a result, companies should ensure that their student lending and debt collection practices are in compliance with CFPB’s expectations.
View the default judgment against Corinthian Colleges, Inc., here: http://files.consumerfinance.gov/f/201510_cfpb_default-judgment-and-order-corinthian.pdf.
View the CFPB’s September 29, 2015, press release announcing concerns about student loan servicing and frameworks for reform here: http://www.consumerfinance.gov/newsroom/cfpb-concerned-about-widespread-servicing-failures-reported-by-student-loan-borrowers/.
View CFPB Director Richard Cordray’s May 14, 2015 prepared remarks on student loans here: http://www.consumerfinance.gov/newsroom/prepared-remarks-of-cfpb-director-richard-cordray-at-the-field-hearing-on-student-loans/.
For more information about these actions or if you need assistance on evaluating the impact on your business, contact Zane Gilmer, a member of the firm’s litigation practice group, or contact your usual Stinson Leonard Street attorney.