CFPB orders firm to pay $1.5M for ‘misleading’ loan payment disclosures

The Consumer Financial Protection Bureau has ruled that customers of a Texas company should get up to $7.5 million for allegedly misleading statements about an auto loan payment service, but in a twist the CFPB could end up paying most of the restitution.

The CFPB issued the order this week against SMART Payment Plan LLC, but determined that the Austin company must only pay $1.5 million of the redress — because the company couldn’t afford more than that — and a $1 civil money penalty. The nominal fine enables the CFPB to compensate harmed consumers for the rest of what they are owed from pre-existing resources in the agency’s civil penalty fund.

The consent order, released Monday, said that if the final restitution amount is less than $7.5 million, the bureau will send the difference to the Treasury Department.

The CFPB alleged that SMART Payment’s service purports to allow consumers to pay off their auto loans faster by making automatic partial payments that match a customer’s paycheck. By paying biweekly rather than monthly, a customer could make 13 monthly payments a year, or one full extra payment, on their auto loan. The company charged a $399 membership fee and a $1.95 biweekly debit fee to consumers enrolled in its auto loan payment accelerator service.

The bureau claims the company marketed the plan “as a financial benefit to consumers, however, [the company] was aware that during the relevant period the vast majority of its consumers ended up paying more in total on their loans by enrolling in the Smart Plan.”

The CFPB said that the company sent individual “benefits summaries” to customers from 2012 to 2015 that purported to state specific interest savings or other savings from enrolling in the plan, but that the fees “would ordinarily exceed the savings.”

“SMART’s disclosures thus created the misleading impression that consumers would save money using its product,” the bureau said in a press release.

The bureau said most of the company’s customers dropped out of the service before the end of their loan term, which resulted in customers “not receiving even the misleading benefit amounts promised.”

David Engelman, SMART Payment’s CEO, said he was pleased with the settlement after a four-year investigation.

“After a thorough and rigorous investigation, the CFPB’s only claims were against documents used from 2012-2015 that had previously been approved by state regulators,” Engelman said in a statement. “Although SMART vigorously disputes the Bureau’s claims, SMART found it best to settle the claims against old documents.”

The consent order prohibits the company from making any misrepresentations about its payment programs. It also requires SMART Payment to account for the total costs of its programs.


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