Alleged illegal disabling of vehicles, and improper double-billing practices, among other things, have earned a Georgia auto-loan servicer a lawsuit from the federal consumer financial protection agency, it said Wednesday.
The lawsuit against USASF Servicing of Lawrenceville, Ga., also alleges that the company improperly repossessed vehicles and failed to return millions of dollars in refunds to consumers.
The Consumer Financial Protection Bureau (CFPB) said it is seeking to obtain redress for consumers and civil money penalties and for the company to stop any future violations. The agency did not provide details on redress and penalties.
According to the complaint filed by CFPB, USASF allegedly disabled vehicles owned by consumers who had loans with the firm by remotely activating devices that prevented cars from starting, even when borrowers were not in default.
USASF, according to CFPB, serviced auto loans that were originated by an affiliate, U.S. Auto Sales, Inc. (which would down most of its business in April). The sales affiliate was a “buy-here-pay-here” auto dealer and lender, CFPB said, with 31 dealerships in the Southeast. USASF offered both Guaranteed Asset Protection and collateral-protection insurance, according to the bureau, which it said are products consumers may buy when they buy or lease a car.
The bureau alleges that USASF committed a “host of illegal practices” that harmed persons with auto loans. Those practices included:
- Illegally disabling cars by using “kill switches,” which CFPB said are used by many auto lenders to prevent a borrower from starting a car. However, the bureau said, USASF incorrectly disabled vehicles at least 7,500 times and caused these devices to play warning tones in vehicles more than 71,000 times during periods when the consumer was not in default or was in communication with USASF about upcoming payments. The firm, CFPB said, remotely disabled vehicles at least 1,500 times after explicitly promising consumers it would not do so.
- Failing to refund premiums to consumers, amounting to millions of dollars, for Guaranteed Asset Protection (gap) insurance when borrowers paid off their loans early or USASF repossessed a car and charged off an account.
- Double-billing of consumers and misapplying payments. CFPB alleges the firm double-charged 34,000 consumers for their insurance each billing cycle, costing them “millions of dollars.” Additionally, the firm is alleged to have wrongfully applied consumers’ extra loan payments first to late fees or collateral-protection insurance instead of accrued interest, costing consumers, CFPB said, more than $1 million in interest and fees that would not have paid if the firm had correctly applied the payments.
- Wrongfully repossessing vehicles of some consumers who never qualified for repossession or had taken action to stop the repossession, the bureau said. “In some instances USASF sold the vehicles that it had wrongfully repossessed,” the agency said.
CFPB Sues USASF Servicing for Illegally Disabling Vehicles and for Improper Double-Billing Practices