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From Banking and Finance Law Daily, October 1, 2015

Indirect auto lenders ordered to pay $44M for deceptive practices

By Lisa M. Goolik, J.D.

The Consumer Financial Protection Bureau has ordered an indirect auto finance company, Westlake Services, LLC, and its auto title lending subsidiary, Wilshire Consumer Credit, LLC, to provide consumers with more than $44 million in cash relief and balance reductions for allegedly using illegal debt collection tactics. According to the consent order, the companies used fake caller ID information, falsely threatened consumers with prosecution, and disclosed information about debts to borrowers’ employers, friends, and family. The companies were also ordered to overhaul their debt collection practices and pay a civil penalty of $4.25 million.

“There’s no excuse for lying to your customers, and today’s action will provide millions of dollars in relief for borrowers caught up in Westlake and Wilshire’s deception,” said CFPB Director Richard Cordray. “Consumers struggling to pay their bills deserve to be treated with respect, not subjected to illegal threats and deceptive phone calls. We will continue to clean up the debt collection market and root out these illegal and inexcusable practices.”

Fake caller ID. According to the CFPB, the companies’ debt collectors used a web-based service, Skip Tracy, to place outgoing calls and choose the phone number and caller ID text that would display. Westlake and Wilshire used Skip Tracy to deceive borrowers into thinking they were being called by repossession companies or similar business, by using phrases such as “Repo,” “Repossession Services,” or “Asset Recovery” to appear in the borrower’s caller ID. The CFPB found that since January 2010, Westlake and Wilshire used Skip Tracy to place or receive calls associated with over 137,000 loan accounts.

Debt collectors. During those calls, Westlake and Wilshire made comments explicitly or implicitly threatening that the borrowers' vehicles would be repossessed. Because Westlake and Wilshire were “creditors” under the Fair Debt Collection Practices Act, the CFPB found the companies became “debt collectors” within the meaning of the FDCPA when they used the caller ID and made representations indicating that a third person was collecting or attempting to collect the debts.

Section 807 of the FDCPA prohibits debt collectors from using any false, deceptive, or misleading representation or means in connection with the collection of any debt. By representing that the calls were originating from repossession companies or similar third-party businesses and implying that repossession was imminent, Westlake and Wilshire made false or misleading representations in violation of the FDCPA, said the CFPB.

Misleading information. The bureau also found that Westlake and Wilshire used Skip Tracy to pose as employees of pizza delivery services or flower shops in order to trick borrowers into disclosing their locations or the locations of their vehicles. In some cases, the companies used the service to appear like the call originated from a family member or friend of the borrower. Because the identity of a caller is a material issue for consumers, particularly for those who are fielding calls from debt collectors, and the misrepresentations were likely to mislead consumers acting reasonably, the bureau found that the companies’ practice was also in violation of the Consumer Financial Protection Act.

Additional violations. The bureau also found that from at least January 2010 until at least April 2014, Westlake and Wilshire called consumers whose vehicles had already been repossessed and used Skip Tracy to make it appear as if the calls were coming from a party associated with the word “Storage.” The companies’ implied that the vehicles would be released if the borrowers made a partial payment on the account; however, the companies would actually only release a repossessed vehicle after a borrower paid the full amount due. When those borrowers paid the amount agreed upon during the phone call, their vehicles were not released.

In addition, the companies unlawfully disclosed information about borrowers’ debts to employers, family, and friends. The companies also failed to disclose the annual percentage rate on certain loans as required by law, and in some cases, changed the due dates or extended the terms of loans without borrowers’ permission, causing more interest to accrue, while telling consumers that the extensions would have a positive effect. These practices violated the Truth in Lending Act, FDCPA, and the CFPA.

Settlement conditions. Under the terms of the order, Westlake and Wiltshire are required to:

  • pay almost $25 million in cash to borrowers and provide approximately $18 million in balance reductions to borrowers;

  • end its deceptive debt collection practices;

  • protect consumers’ private information and stop illegally disclosing borrowers’ loan information to third parties;

  • end unlawful advertisements by ensuring compliance with the Truth in Lending Act before publication;

  • provide consumers with truthful information about their loans; and

  • pay a $4.25 million civil penalty to the CFPB’s Civil Penalty Fund.

Companies: Westlake Services, LLC; Wilshire Consumer Credit, LLC

MainStory: TopStory CFPB ConsumerCredit CrimesOffenses DebtCollection EnforcementActions Loans TruthInLending UDAAP

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