Compliance Blog

Earlier this month the Consumer Financial Protection Bureau (CFPB) issued a consent order against Nissan Motor Acceptance Corporation (Nissan MAC) in connection with Nissan MAC’s collections and repossession practices. Nissan MAC previously settled with the United States Department of Justice (DOJ) for alleged violations of the Servicemembers Civil Relief Act (SCRA) in connection with its vehicle repossession practices. A NAFCU Compliance blog post from 2019 explained the SCRA settlement with DOJ. The CFPB consent order addressed collection and repossession practices that were not implicated in the DOJ SCRA settlement.

In the consent order, the CFPB concluded that three of Nissan MAC’s alleged collection and repossession practices constituted unfair acts and practices that violated the Consumer Financial Protection Act of 2010 (CFPA). The consent order noted that “[a]n act or practice is unfair if it causes or is likely to cause substantial injury to consumers that is not reasonably avoidable by consumers and that is not outweighed by countervailing benefits to consumers or competition.”

First, the CFPB determined that Nissan MAC wrongfully repossessed vehicles under the following circumstances:

• Borrowers had made payments decreasing their delinquency to less than 60 days;
• Borrowers had made arrangements with Nissan MAC to make payments by a certain date and had not breached those arrangements; and
• Borrowers and Nissan MAC agreed upon extension agreements to cure any delinquencies.

These practices were found to be unfair because they were contrary to Nissan MAC’s policies. They also contradicted information that was allegedly passed on to these consumers.

Second, the CFPB objected to Nissan MAC’s repossession agents’ refusal to return personal property left in repossessed cars unless consumers paid a fee to recover the property. The CFPB concluded that the alleged refusal to return personal property unless a fee was paid was unfair under the CFPA. The CFPB also seemed to take issue with Nissan MAC representing to consumers that it had no control over these personal property repossession fees even though Nissan MAC sometimes directed their repossession agents to lower these repossession fees.

Third, the CFPB adjudged that Nissan MAC’s failure to advise consumers who made payments by phone about the different costs to the consumer of the various payment options was unfair under the CFPA. The consent order noted that consumers were charged $5 to make payments by electronic check when making a payment by phone. If consumers chose to pay with a credit card, they were charged $12.95. Nissan MAC allegedly did not communicate the different fees to their borrowers through any disclosures, and Nissan MAC’s payment processing vendor did not disclose the difference in fees during phone-payment calls. Because consumers were not advised about the ability to choose a less costly method to make a payment by phone, the CFPB concluded that this was an unfair act or practice.

The CFPB also found that language included in loan extension agreements constituted a deceptive act or practice under the CFPA. A deceptive act or practice “(i) . . . is a representation or omission of information that is likely to mislead consumers acting reasonably under the circumstances; and (ii) that information is material to consumers.” Nissan MAC allegedly included language in its loan extension agreements that appeared to suggest that borrowers who entered into these extension agreements could not file for bankruptcy protection. The CFPB noted that, in general, “[a]n agreement to waive an individual’s right to file for bankruptcy is void as against public policy.” Consequently, the representations suggesting that borrowers could not file for bankruptcy after entering into an extension agreement were deceptive acts or practices because they were false and misleading.

The consent order requires Nissan MAC to do the following to address the CFPB’s conclusions:

• Pay a civil money penalty in the amount of $4 million;
• Refund fees, credit outstanding charges and pay redress to consumers who were harmed by the wrongful repossession of their vehicles;
• Ensure that its repossession agents no longer require payment of a fee to return a consumer’s personal property found in a repossessed vehicle;
• Adopt policies and procedures to prevent wrongful repossessions and remedy any future wrongful repossessions;
• Review on a quarterly basis any wrongful repossessions that occur to identify the root cause and any patterns or practices that may need to be modified;
• Disclose the costs of each method of making a payment by phone before consumers are asked to choose which method of payment they want to use; and
• Amend their extension agreements to stop suggesting that consumers cannot file for bankruptcy as a result of entering into an extension agreement.

Credit unions may wish to review their collections and repossession policies and procedures to see if they address some of the concerns noted by the CFPB in the consent order.