Austin firm misrepresented ‘savings’ to consumers from auto-loan payment program; likely to pay 20% of $7.5 million in ordered redress plus $1 fine

A firm that misrepresented the impact of its fees on consumers who used its service to make their auto loan payments is expected to pay just $1.5 million of the $7.5 million in redress specified in a consent order with the Consumer Financial Protection Bureau (CFPB), according to information released by the bureau Monday.

The CFPB said SMART Payment Plan LLC, a limited liability company with a principal place of business in Austin, Texas, operates a loan “payment accelerator program” for auto loans called the SMART Plan that deducts payments from consumers’ bank accounts every two weeks and then forwards these payments every month to the consumers’ lenders. This arrangement meant consumers made one full extra payment to SMART each year (26 half-payments a year, so 13 full payments over 12 months), and SMART used that extra payment to pay itself all or part of a $399 membership fee. The company also charged a $1.95 per bi-weekly debit fee, the order shows.

The order shows that SMART markets its plan to consumers almost exclusively through automobile dealers and that, during the relevant period, enrolled more than 180,000 consumers. “Tens of thousands of these consumers paid the full enrollment fee on an interest-bearing loan,” the order states.

The CFPB said that SMART provided individualized “benefits summaries” that purported to state a specific amount of interest savings or other money savings consumers would get by enrolling in the SMART Plan, but SMART’s fees would ordinarily exceed the savings. These misleading statements were in violation of the Consumer Financial Protection Act of 2010’s prohibition against deceptive acts or practices, the bureau said.

The bureau said the consent order imposes a judgment requiring SMART to pay $7.5 million in redress and sets requirements for the firm to prevent future violations. However, the ordered redress amount is suspended upon SMART’s payment of $1.5 million by Dec. 31 and a $1 civil money penalty to the CFPB, it said.

“The suspension of the full payment for redress, as well as the $1 civil penalty, is based on SMART’s demonstrated inability to pay more based on sworn financial statements,” the bureau said in a release. “Harmed consumers may be eligible for additional relief from the Bureau’s Civil Penalty Fund.”

The consent order states an effective period of five years.

Consumer Financial Protection Bureau Settles with SMART Payment Plan, LLC for Deceptive Sales Practices