Houston Independent Automobile Dealers Association December 2015 Issue: Year in Review | Page 11

tactics, changed due dates or extended the terms of title loans without the customers' consent
while misrepresenting to customers that the changes would be beneficial, and failed to clearly
disclose the APRs of title loans in their advertisements. The CFPB also claimed that the
companies provided false caller ID information, falsely threatened to refer customers for
investigation or criminal prosecution, falsely implied that customers' repossessed vehicles would
be returned if the borrower made a partial payment, disclosed customers' loan information to
third parties, and paid a third-party repossession company to make debt collection calls to
customers when the defendants allegedly had no intention to repossess the customers’
vehicles. Under the consent order, the companies must pay $44.1 million to customers and
$4.25 million as a civil penalty, and must end deceptive debt collection practices, protect
customers' private information, end unlawful advertisements, and give customers truthful
information about their extensions of credit.
Goodbye, Arbitration Agreements. To no one’s surprise, on October 7th, the CFPB
announced that it is considering proposing rules to ban consumer financial companies from
using the sorts of arbitration agreements currently employed by creditors to reduce the risk of
class action lawsuits. The Dodd-Frank Act required the CFPB to study the use of arbitration
clauses in consumer financial markets and gave it the power to issue regulations to protect
consumers consistent with the study's findings. The CFPB claims that its study - released in
March - shows that arbitration clauses restrict consumers' relief in disputes with financial service
providers by allowing companies to block class action lawsuits and that, in the consumer
finance markets studied (notably not including vehicle lease and financing), very few consumers
seek individual relief through arbitration or the federal courts, while millions of consumers are
eligible for relief each year through group settlements. The proposals would not ban arbitration
clauses altogether, but the clauses would have to say explicitly that they do not apply to cases
filed as class actions unless and until class certificati on is denied by the court or the class
claims are dismissed in court. The proposals would also require that companies choosing to use
arbitration clauses for individual disputes submit to the CFPB the claims filed and awards
issued. The Bureau is considering publishing claims and awards on its website so the public can
monitor them.
FTC (Again) Targets Advertising. On October 20, the FTC approved final consent orders
against two Las Vegas dealers that allegedly misrepresented the cost of cars in advertising. In
June, TC Leadership LP, doing business as Planet Hyundai, and JS Autoworld Inc., d/b/a
Planet Nissan, agreed to settle FTC charges that their ads included heavily discounted prices
not generally available to consumers. The consent orders prohibit the dealers from
misrepresenting the cost of financing or leasing a vehicle, stating the amount due at signing
without disclosing certain lease terms, and failing to comply with Regulation M and the
Consumer Leasing Act, and Regulation Z and the Truth in Lending Act. They are also prohibited
from stating the amount or percentage of any down payment without disclosing repayment
terms and the annual percentage rate.
Litigation
Car Buyers Who Relied on Oral Statements that Contradicted Written Documents Entitled
to Proceed on Fraud Claims: Consumers buying an SUV told the salesperson they could not
afford payments greater than $300 per month. The salesperson told them their payments would
be about $300 per month for 36 months. The finance person also told them that their payments
would be around $300 per month and then asked them to sign various documents while hiding
the text of the documents except for the area requiring a signature or initial. When they got
home, they reviewed the documents and noticed they were obligated to make 12 monthly