Used Car Dealer Fined $8 Million
HandelontheLaw.com Staff Writer
In late November 2014, the Consumer Financial Protection Bureau (CFPB) fined America’s largest “buy here, pay here” lender $8 million for customer harassment and incorrect reporting to the country’s 3 major credit bureaus.
DriveTime Automotive Group, Inc. is the U. S.’s largest seller of used cars, offering in-house auto loans to its customers. A CFPB investigation discovered that DriveTime’s affiliated lender, DT Acceptance Corporation: illegally harassed customers at their workplaces, threatening their jobs: and incorrectly reported to the 3 major credit bureaus, even when the company had “reasonable cause to believe” that the information was incorrect.
DriveTime’s average customer earns $37,000 - $50,000 per year and has a FICO credit score of 461 – 554 (vs. a FICO score of 660 or higher, which is deemed “good”). These low-income, poor-credit customers pay an average of 19% on their auto loans and at any given time 45% of them were delinquent in their payments.
Predictably, DriveTime’s associated lender, DT Acceptance Corporation, employs 290 collection agents. Their debt collection practices were scrutinized by the CFPB because “buy here, pay here” car dealers like subprime lenders, a type of lender specializing in lending to borrowers with poor or inadequate credit histories. The payoff in selling cars to vulnerable consumers with in-house financing is at least twofold: the interest rate is higher – allegedly hovering around 19% but going as high as 30%; and if a customer falls behind in payments, the company repossesses and resells the car, which can happen many times with a single car.
The lucrative nature of this business has made it expand in the U. S. over the past decade. “Buy here, pay here” car dealers sold 1.3 million cars in the U. S. and 2.4 million cars in 2010. The industry is fractured and counting the actual number of cars sold is difficult; however, the Federal Reserve estimates that “buy here, pay here” lenders have approximately 10% of the $940.9 billion U. S. auto finance market.
The CFPB’s actions against DriveTime and DT Acceptance are considered just punishment and a warning to other “buy here, pay here” auto dealers. The CFPB is also available for consumers to submit complaints and tell their stories about dealing with “buy here, pay here” auto dealers.
DO’S AND DON’TS
DO submit a complaint against a “buy here, pay here” auto dealer here: http://www.consumerfinance.gov/complaint/
DO tell your story about dealing with a “buy here, pay here” auto dealer here:
By Kathy Catanzarite
Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information can not be guaranteed. Readers act on this information solely at their own risk. Neither the author, handelonthelaw.com, or any of its affiliates shall have any liability stemming from this article.
CREDIT/COLLECTIONS DOS AND DON'TS