Houston Independent Automobile Dealers Association April Issue: Collections | Page 17

The CFPB and the DOJ alleged that TMCC's policy of buying retail contracts from dealers
having rates up to 250 basis points over TMCC's wholesale buy rate resulted in AfricanAmerican and Asian/Pacific Islander buyers paying auto financing rates higher, on average,
than non-Hispanic white consumers, without regard to their creditworthiness. Under the orders,
TMCC will pay up to $21.9 million in restitution to an unspecified number of consumers. The
consent orders require TMCC to limit dealer discretion in setting rates to no more than 1.25% or
1% over the applicable buy rate, depending on the term. TMCC also has the option of moving to
non-discretionary dealer compensation. CFPB Director Richard Cordray announced that TMCC
had committed not to raise its buy rates to cover "any additional nondiscretionary component of
dealer compensation," but this commitment does not appear in the CFPB's order.
Complain, Complain, Complain. On January 28, the CFPB released its monthly complaint
report, which highlights trends in the complaint data the CFPB receives through its Consumer
Complaint Database. The report includes complaint data specific to certain companies, overall
complaint volume and complaint volume by state, and other trends in the data. Each month, the
report spotlights complaints about a particular issue and from a particular geographic location.
The latest report focuses on financial services such as debt settlement, check cashing, money
orders, and credit repair and highlights complaints from consumers residing in New York State.
State Enforcement Actions
On January 15, the Washington State attorney general announced a settlement with a car
dealership that allegedly sent promotional mailers that looked similar to the National Highway
Traffic Safety Administration's recall notifications. The mailers notified recipients of possible
recalls and offered to buy their vehicles, but failed to clearly and conspicuously disclose that the
offer to buy was independent of any recall notification. The dealership will pay approximately
$74,000 to resolve allegations that the mailers misled consumers in violation of the state
Consumer Protection Act.
Litigation
Arbitration Agreement Signed in Connection with Vehicle Sales Con tract Deemed Void
Remains Enforceable: A car buyer signed a retail buyers order, an installment sale contract,
and an arbitration agreement at the time of purchase. She sued the dealer for violating the
Missouri Merchandising Practices Act by failing to provide title to her new vehicle. The dealer
moved to compel arbitration, and the trial court denied the motion. The trial court concluded that
the sale contract was fraudulent and void because the dealer did not provide title at the time of
sale or since. Because the arbitration agreement should be construed with the other contract
documents, the trial court found it was void and unenforceable as well. The Supreme Court of
Missouri noted that, under the governing Federal Arbitration Act, arbitration agreements are
severable and considered separate from any underlying related agreements and, therefore, are
enforceable unless the arbitration agreement itself is invalid under generally applicable state law
principles. Relying on U.S. Supreme Court precedent, the state high court concluded that the
unenforceability of the sale contract in this case was irrelevant to the enforceability of the
arbitration agreement contained within or executed contemporaneously with the sale contract
because the buyer did not directly challenge the arbitration agreement. See Ellis v. JF
Enterprises, LLC, 2016 Mo. LEXIS 4 (Mo. January 12, 2016).
RISC Assignee Properly Cured Usurious Contract: After taking assignment of an installment
sale contract for the purchase a used car, the assignee discovered that the contract rate was
greater than the 24% maximum rate allowed by the Maryland Credit Grantor Closed End Credit