FTC: Shady Collection Practices Cost California Auto Lender $5.5 Million

If you can’t collect the nice way, then don’t collect at all. In this case, a national subprime auto lender caught using unsavory tactics to collect and service consumer loans must pay $5.5 million and change its ways to settle Federal Trade Commission charges.

California-based Consumer Portfolio Services, Inc. allegedly used illegal tactics, such as collecting money consumers did not owe, harassing consumers and third parties, and disclosing debts to family, friends and employers, when servicing and collection consumers’ loans.

According to the FTC complaint, CPS’ loan-servicing violations include:

  • Misrepresenting fees consumers owed in collection calls, monthly statements, pay-off notices, and bankruptcy filings;
  • Making unsubstantiated claims about the amounts consumers owed;
  • Improperly assessing and collecting fees or other amounts;
  • Unilaterally modifying contracts by, for example, increasing principal balances;
  • Failing to disclose financial effects of loan extensions;
  • Misrepresenting that consumers must use particular payment methods requiring service fees; and
  • Misrepresenting that the company audits verified consumer accounts balances.

To settle the charges, the company agreed to refund or adjust 128,000 consumers’ accounts more than $3.5 million and forebear collections on an additional 35,000 accounts. Additionally, the company will pay $2 million in civil penalties for violating the Fair Debt Collection Practices Act and the Fair Credit Reporting Act Furnisher Rule.

Under the settlement order, CPS is required to change its business practices to comply with the requirements set forth by the law and establish a comprehensive data integrity program to ensure accuracy, integrity and completeness of its loan servicing process.

Refunds and adjustments to consumer accounts must begin within 90 days.

Auto Lender Will Pay $5.5 Million to Settle FTC Charges It Harassed Consumers, Collected Amounts They Did Not Owe [Federal Trade Commission]