The CFPB announced today that it has charged DriveTime Automotive Group Inc., an Arizona-based company that sells vehicles as well as originates and services auto loans, with harming customers by making harassing debt collection calls and providing inaccurate credit information to credit reporting agencies.
DriveTime and its finance company, DT Acceptance Corporation, make up one of the largest buy-here, pay-here car companies in the U.S., operating 117 dealerships in 20 states and holding more than 150,000 outstanding auto installment contracts.
“Buy-here, pay-here” dealers typically target economically vulnerable subprime borrowers, offering high-interest loans and aggressive repossession tactics.
In DriveTime’s case the average customer has an annual income of $37,000 to $50,000 and a FICO score between 461 and 554.
According to the CFPB, at least 45% of DriveTime’s auto installment contracts were delinquent at any given time, with approximately 69,000 installment contracts past due at the end of 2013.
When customers fell behind on their installment payments, DriveTime’s extensive collections operation – made up of at least 290 collection employees in two domestic call centers and 80 contractors in Barbados – allegedly began placing tens of thousands of collection calls each weekday.
The CFPB alleges that often the collection calls and practices utilized by DriveTime were in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which establishes that companies’ practices can be found unfair if consumers cannot reasonably avoid being harmed.
Harmful consumer debt collection practices allegedly employed by DriveTime included:
• Harassing borrowers at work: The CFPB found that DriveTime collectors often called borrowers at work, and DriveTime management encouraged these calls. Several consumers tell the CFPB they requested DriveTime not to call them at work, but the company continued anyway.
• Harassing borrowers references: Customers to DriveTime were required to provide the names and phone numbers of at least four reference when they applied for financing. When customers fell behind on payments, the company allegedly called those references repeatedly.
• Making excessive, repeated calls to wrong numbers: In DriveTime’s effort to reach consumers who fell behind on payments, the company regularly used third-party databases to find contact information. Often these databases provided the wrong numbers. The CFPB found that upon receiving DriveTime’s calls, numerous consumers told the company they had the wrong number, but calls continued.
• Providing inaccurate repossession information to credit reporting agencies: In some cases, DriveTime gave the three major consumer reporting agencies inaccurate information on the timing or repossession and dates of delinquencies. This action made it appear on consumers’ credit reports that consumers’ vehicles had been repossessed more recently than the actual repossession.
• Failing to properly handle credit information furnishing disputes: In the event that incorrect information was submitted to reporting agencies, DriveTime often mishandled the resulting consumer complaints. In several instances, consumers disputed the same account information several times without the inaccurate information being corrected. In other cases, DriveTime informed the consumers in writing that the information had been corrected, when it had not been.
• Failing to implement reasonable procedures to ensure the accuracy of consumers’ credit information: The CFPB found that DriveTime failed to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the information it furnished to credit reporting agencies. The policies and procedures put in place by DriveTime were not appropriate to the nature, size, complexity, and scope of its furnishing activities.
In addition the paying an $8 million penalty to the CFPB Civil Penalty Fund, DriveTime and its related companies must end unfair calling practices, disclose collection options to consumers, cease furnishing inaccurate repossession information, correct credit reporting information, provide credit reports to harmed consumers and implement an audit program.