The firm 3rd Generation, Inc., doing business as California Auto Finance (California Auto), will repay a total of $565,813 to 5,782 consumers plus a $50,000 civil money penalty for illegally charging interest on its loss damage waiver product under a consent order filed Friday by the Consumer Financial Protection Bureau (CFPB).
The CFPB said the order requires California Auto to refund or credit customers harmed by the conduct, furnish corrected information to credit reporting agencies, and pay a civil penalty. It also prohibits the company from charging interest on late payments without disclosing costs.
The bureau said the California auto-loan finance company services subprime auto loans that were originated by car dealers and later assigned to California Auto. The company required its customers to agree that if they had insufficient insurance coverage for their automobiles, they would add “loss-damage-waiver” (LDW) coverage to their accounts. For a monthly fee, the bureau said, the product covers cancellation of the customer’s debt in the event of a total vehicle loss or the cost of a repair if the vehicle was not a total loss.
The CFPB said California Auto, which charged interest when a customer’s LDW payment was late but did not disclose that to the customer, engaged in unfair practices against in violation of the Consumer Financial Protection Act (CFPA).
The order addresses activity that took place between 2016 and 2021.