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From Banking and Finance Law Daily, June 30, 2015

Auto-lender accused of UDAAP violations for leveraging military status

By Katalina M. Bianco, J.D.

In a new article, author Timothy Karcher of Proskauer Rose LLP discusses a recent civil action brought by the Consumer Financial Protection Bureau against Security National Automotive Acceptance Company, LLC, an auto lender that primarily caters to U.S. servicemembers. The bureau alleges in the suit that Security’s collection practices are unlawful.

According to the article, Security attempted to collect debts from servicemembers by threatening to or actually contacting the servicemembers’ commanding officers and disclosing details about the debts. The bureau’s complaint makes clear that the lender took advantage of the vulnerability of the borrowers because of their status as members of the military, an advantage that would not be available to the lender if the borrowers were civilians.

The bureau action discussed by the author is timely and newsworthy as it merges three areas of ongoing interest to the CFPB, other federal and state agencies, and various industry stakeholders: UDAAP, treatment of servicemembers, and indirect auto lenders. Industry stakeholders remain concerned about UDAAP’s "I’ll know it when I see it" nature and the fact that many of the CFPB’s enforcement actions are based on UDAAP violations. The bureau and other agencies have placed a good amount of focus on products and services offered to servicemembers, veterans, and their families in recent years, and as for indirect auto lending, CFPB panel members at the recent American Bankers Association annual regulatory compliance convention stated outright that this is an industry that is of primary concern for the bureau.

Karcher outlines the facts of the case and discusses the legal bases of the CFPB’s action in the article. Further, he explains why this action differs from previous lending actions, "how this will play out in court," and what it might mean in terms of future CFPB actions.

Attorneys: Timothy Karcher (Proskauer Rose LLP)

Companies: Security National Automotive Acceptance Company, LLC

MainStory: TopStory CFPB DebtCollection Loans UDAAP

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