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From Banking and Finance Law Daily, November 19, 2014

Buy-here, pay-here auto dealer fined $8 million for harassing consumers

By Lisa M. Goolik, J.D.

The Consumer Financial Protection Bureau has taken action against the largest “buy-here, pay-here” car dealer in the nation for making harassing debt collection calls and providing inaccurate credit information to credit reporting agencies. The consent order requires that Arizona-based DriveTime Automotive Group, Inc. pay an $8 million civil money penalty, end its unfair debt collection tactics, fix its credit reporting practices, and arrange for harmed consumers to obtain free credit reports.

“Consumers who purchase a car at a buy-here, pay-here dealer deserve to be treated fairly,” said CFPB Director Richard Cordray. “DriveTime harassed and harmed countless consumers, many of whom were economically vulnerable. Our action today forces DriveTime to pay the price for its illegal debt collection tactics and for neglecting the accuracy of consumers’ credit information.”

Buy-here, pay-here. The term “buy-here, pay-here” means that the dealer sells the car, as well as originates and services the auto loan. Buy-here, pay-here dealers typically target subprime borrowers. According to the bureau, at least 45 percent of DriveTime’s auto installment contracts were delinquent at a given time. At the end of 2013, the dealer held more than 150,000 outstanding auto installment contracts, and approximately 69,000 were past due.

When accounts were past due, DriveTime used an “extensive collections operation” to collect on the delinquent accounts, employing 290 collection agents in two domestic call centers and 80 contractors in Barbados. These employees and contractors placed tens of thousands of collection calls each weekday. The bureau found that DriveTime violated federal consumer financial laws and harmed consumers through illegal actions, such as:

  • harassing borrowers at work—one consumer was unfairly called 30 times at work after her do-not-call request;

  • harassing borrowers’ references—when consumers fell behind on their payments, DriveTime repeatedly called consumers’ references;

  • making excessive, repeated calls to wrong numbers—in some cases, calling these wrong numbers for over a year before stopping;

  • providing inaccurate repossession information to credit reporting agencies—DriveTime gave the agencies information that inaccurately reflected the timing of repossessions and dates of first delinquency, which impacted the consumers’ ability to get credit, employment, or housing;

  • failing to properly handle credit information furnishing disputes—in some cases, DriveTime informed the consumers in writing that the information had been corrected, when it had not been; and

  • failing to implement reasonable procedures to ensure the accuracy of consumers’ credit information.

Consent order. In addition to assessing an $8 million penalty, the consent order requires that DriveTime:

  • end unfair calling practices;

  • provide a clear and conspicuous written notice to new and existing customers explaining how they can limit the times of day that DriveTime will call them;

  • cease furnishing inaccurate repossession information;

  • correct credit reporting information;

  • provide credit reports to harmed consumers; and

  • implement an audit program that audits the information it furnishes to the credit reporting agencies on a monthly basis and monitors the disputes it receives.

Companies: DriveTime Automotive Group, Inc.

MainStory: TopStory CFPB ConsumerCredit DebtCollection EnforcementActions FairCreditReporting Loans

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