Attacks on consumers mounting, over arbitration

In an amazingly lopsided editorial, the Albuquerque Journal published this hit piece, slamming the Consumer Financial Protection Bureau for its gutsy work to restore your ability to fight back in court, as a consumer, by joining forces with other consumers who have also been victimized by crooks who engage in illegal practices:

Albuquerque Journal editorial

Here’s the letter to the editor I sent them, in response. However, it won’t be too surprising if it doesn’t appear in print — for reasons you can readily guess:

Funny — this newspaper didn’t object when the car dealers got a special exemption from the Federal Arbitration Act, that allows them to sue anyone they please. Since then, they have sued auto manufacturers, the federal government, their customers, and each other, and somehow you are fine with that, but apparently think their customers do not deserve to have the same access to the courts.

When Congress restored the right to go to court, for car dealers, the National Automobile Dealers Association wrote to members of Congress and promised not to oppose restoring the same rights to car buyers. Then they turned around and killed a bill that would have done exactly that.

If consumers don’t win back our rights through the CFPB’s rulemaking, then it looks like we will have to resort to free market solutions, like not buying another car from a dealer until we have the same legal protections they do.

Here’s the letter the car dealers sent to Members of Congress

And —  in case you haven’t already seen enough hypocrisy in this battle, here’s what Republican Senator Chuck Grassley of Iowa had to say, in favor of the legislation he authored, giving car dealers a special exemption from being forced to arbitrate their claims, in order to purchase a franchise to sell cars:

“While arbitration serves an important function as an efficient alternative to court, some trade-offs must be considered by both parties, such as limited judicial review and less formal procedures regarding discovery and rules of evidence. When mandatory binding arbitration is forced upon a party, for example when it is placed in a boiler-plate agreement, it deprives the weaker party the opportunity to elect another forum. As a proponent of arbitration I believe it is critical to ensure that the selection of arbitration is voluntary and fair…Unequal bargaining power exists in contracts between automobile and truck dealers and their manufacturers. The manufacturer drafts the contract and presents it to dealers with no opportunity to negotiate…The purpose of arbitration is to reduce costly, time-consuming litigation, not to force a party to an adhesion contract to waive access to judicial or administrative forums for the pursuit of rights under State law.”

Senator Grassley also said:

“This legislation will go a long way toward ensuring that parties will not be forced into binding arbitration and thereby lose important statutory rights. I am confident that given its many advantages arbitration will often be elected. But it is essential for public policy reasons and basic fairness that both parties to this type of contract have the freedom to make their own decisions based on the circumstances of the case.”

Couldn’t have said it better myself. So how come he and his colleagues in the House have changed their tune, when it comes to consumers?

Could it be that Sen. Grassley and the Republican Congress rely on campaign contributions from Wall Street crooks who pass on a tidy portion of the $$ they extract from consumers, via the Rip-off TAX? Hmmmmm….

Car Hop Ordered to cease harming consumers’ credit

So-called “Buy Here Pay Here” dealers like Car Hop often lure used car buyers onto their car lots with signs that scream:  “No Credit? No Problem!”  “Repo? No Problem!” “Bad Credit? No problem!”

They even promise that if you buy a car from them, and make your payments on time, they will help you restore or improve your credit. That’s one of the major reasons many car buyers shop there.

But all too often,what actually happens is another story.  American’s top consumer financial protection watchdog, the Consumer Financial Protection Bureau, just issued this announcement:

“CFPB Orders CarHop to Pay $6.4 Million Penalty for Jeopardizing Consumers’ Credit

One of Nation’s Biggest “Buy-Here, Pay-Here” Auto Dealers Provided Inaccurate Credit Information

WASHINGTON, D.C. —  Consumer Financial Protection Bureau (CFPB) is taking action against CarHop, one of the country’s biggest “buy-here, pay-here” auto dealers, and its affiliated financing company, Universal Acceptance Corporation, for providing damaging, inaccurate consumer information to credit reporting companies. CarHop and its affiliate also failed to provide accurate, positive credit information that it promised consumers it would supply to the credit reporting companies. The CFPB’s investigation found that the companies inaccurately reported information for more than 84,000 accounts on a widespread and systemic basis. The CFPB is ordering the companies to cease their illegal activities and pay a $6,465,000 civil penalty.

“Many consumers went to CarHop because they needed transportation and wanted to build up a good record of paying their bills,” said CFPB Director Richard Cordray. “But CarHop and Universal Acceptance Corporation thwarted those expectations by inaccurately furnishing negative credit information. The CFPB will not stand for companies whose sloppy actions jeopardize consumers’ credit.”

Minnesota-based CarHop, also known as Interstate Auto Group, is one of the largest buy-here, pay-here auto dealers in the nation. Buy-here, pay-here dealers sell cars and originate and service the auto loan. CarHop has approximately 50 retail locations in approximately 15 states. CarHop sells vehicles primarily to customers with nonexistent or poor credit histories in need of subprime or deep subprime credit. It markets itself as a way for these consumers to rebuild or build-up good credit by saying it will provide positive payment histories to the credit reporting companies. Consumers who buy from CarHop frequently do so because they suffer from poor credit scores and other financial challenges.

Universal Acceptance Corporation, on behalf of CarHop, furnishes consumer account information to all three major consumer reporting companies on a monthly basis. The CFPB found that the company reported information that it knew or had reasonable cause to believe was inaccurate. The company inaccurately furnished information for more than 84,000 accounts from about January 2009 until September 2013. With CarHop, consumers may not have even known about the damage to their credit profiles resulting from the erroneous reporting unless and until they checked their credit reports.

Almost all the information the companies inaccurately furnished to the credit reporting companies could potentially harm customers. The negative information could lower a consumer’s credit score, hamper their ability to obtain other credit, and hurt their job prospects. The CFPB found that CarHop and Universal Acceptance Corporation violated the Fair Credit Reporting Act and the Consumer Financial Protection Act. Specifically, the companies:

  • Deceived consumers into believing they could build up good credit with CarHop: As part of its marketing and sales practices, CarHop represented in writing to consumers that it reports “good credit” to the credit reporting companies. CarHop also emphasized to consumers its part in helping them build and maintain good credit. This appealed to consumers trying to build up their credit profiles with a history of on-time payments. But the company, through Universal Acceptance Corporation, failed to furnish certain positive information, including information that would support “good credit,” for tens of thousands of consumers.
  • Provided inaccurate repossession information: CarHop customers had the right to voluntarily return their vehicles within 72 hours of purchase for a full refund without any penalties or additional obligations. But for some customers who returned their vehicles under this policy, Universal Acceptance Corporation did not accurately report to the credit reporting companies what really happened. Instead, the company inaccurately reported on numerous occasions that the cars had been repossessed or that the consumer still owed money.
  • Incorrectly reported previous customers as still owing money: For consumers 72 hours past purchase, CarHop often resolved disputes by having the customer return the vehicle. It then issued documentation to the customer saying they no longer had any financial obligations and had settled their account. But for hundreds of customers, in the months or even years that followed after they returned their vehicles, Universal Acceptance Corporation inaccurately furnished, on a monthly basis, information that said that the customer still had an outstanding balance. Sometimes, the company inaccurately reported the amount past due in continuously increasing amounts.
  • Failed to have reasonable written policies and procedures to ensure the accuracy of consumers’ credit information: Universal Acceptance Corporation had no written policies and procedures regarding the accuracy and integrity of the consumer information it furnished until early August 2013. The policies it adopted that month were not reasonable or appropriate to the nature, size, complexity, and scope of the company’s activities.

Enforcement Action

Pursuant to the Dodd-Frank Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws. Under the terms of the CFPB orders released today, CarHop and Universal Acceptance Corporation must:

  • Cease misrepresenting that they will report “good credit”: The companies must not misrepresent to customers that they will report “good credit” or other positive information to the credit reporting companies.
  • Correct credit reporting information: If Universal Acceptance Corporation furnished information to a credit reporting company that it knew or had reasonable cause to believe was inaccurate, it must notify the credit reporting company of the inaccuracy. When it does so, it must either provide corrected information or request that the company delete the wrong information from the consumer’s file if accurate information is not available.
  • Provide credit reports to harmed consumers: CarHop and Universal Acceptance Corporation must, for consumers who had incorrect information furnished about their accounts, arrange for consumers to obtain free credit reports from the credit reporting companies that received the inaccurate information.
  • Implement an audit program to ensure laws are followed: CarHop and Universal Acceptance Corporation must implement a process for auditing information that Universal Acceptance Corporation furnishes to the credit reporting companies on a monthly basis. This process must include monitoring and evaluating the disputes the companies receive. The audit is designed to ensure the integrity and accuracy of the information.
  • Pay a $6,465,000 civil penalty: CarHop and Universal Acceptance Corporation will pay a $6,465,000 penalty to the CFPB’s Civil Penalty Fund.”

The consent order can be found at: http://files.consumerfinance.gov/f/201512_cfpb_carhop-consent-order.pdf

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Actions like this one are why consumers all over America are growing to LOVE our consumer watchdog agency, the CFBP. And why car dealers are trying to get special favors from Congress to stop the CFPB from being able to do its job.

Greedy car dealers and lenders are hell-bent on finding ways to keep profiting from the excessive interest charges paid by people who actually deserve to pay less, based on their credit histories.

Consumer protection groups like CARS are fighting back. If you were ripped off by Car Hop, we’d love to hear from you. Here’s where you can contact us:

http://carconsumers.org/contact.htm

Plus here are tips for how to get a good deal on a nice, safe used car — without getting scammed by a sleazy car dealer:

http://carconsumers.org/usedcarbuyingtips.htm

With best wishes for safe, happy motoring —

CARS

 

 

 

 

 

 

 

Buy a car – surrender your rights?

One more reason not to buy a car from a car dealer:  when you do, they force you to give up your right to sue them if they cheat you.  So say good-bye to being able to take advantage of consumer protection laws.

Think a dealer wouldn’t dare roll back the odometer? Think again. They just slip a clause in your contract that says you can’t sue. Then when you find out your low-mileage car actually has over 100,000 extra miles that “disappeared” from the odometer — good luck trying to sue them under the Federal Odometer Act.

Car dealers used to face tough sanctions, including punitive damages, for ripping off consumers. But with rare exceptions, those days are gone.  That’s because car dealers insert “arbitration” clauses into their contracts. Then, after you’ve been shopping, test-driving cars, and negotiating for an average of 4 hours, they shove a stack of documents across a desk and tell you to “sign here, here and here.”

What they don’t tell you is that when you sign, you are giving up your rights under state and federal consumer protection laws. So forget hauling them before a judge or jury, who can throw the book at them. Instead, if you get any hearing at all, it’s before an “arbitrator” whose company just happens to be paid by — you guessed it — the dealer.

Under rulings by the Republican majority on the U.S. Supreme Court, this is perfectly legal.

Ironically, the dealers got a special exemption from Congress that allows them to sue anyone they please. They’re free to use the courts. But you can’t.

Evidence is mounting about how biased and unfair arbitration is. Check out this new report, issued by the Consumer Financial Protection Bureau. No wonder car dealers HATE this consumer watchdog agency. It shows how rigged the game is, when you buy a car from a dealer:

Consumer Financial Protection Bureau report

Don’t end up like Jon Perz, who has been waiting over 7 years for justice, after a car dealer in San Diego sold him an unsafe car.

YouTube Video of used car nightmare — over 1.3 million views

Be a smart shopper. Check out CARS’ car-buying tips for how to get a safe, reliable used car — without having the hassle or risk of buying from a dealer:

CARS Used Car Buying Tips

Happy, safe car shopping!

 

 

 

 

 

 

 

 

Ally Bank ordered to pay $80 million to consumers harmed by discriminatory lending

More than 235,000 African-American, Hispanic, and Asian Pacific Islander borrowers, who were charged higher interest rates on their auto loans from Ally Bank, based on their race, stand to get back $80 million, thanks to courageous action by the Consumer Financial Protection Bureau and U.S. Department of Justice.

The consumer protection and law enforcement agencies are coordinating their efforts to curb discriminatory lending in auto loans, which cost car buyers billions of dollars in hidden extra fees, while fattening the profits made by lenders and auto dealers. This is the government’s largest auto loan discrimination settlement ever.

“Discrimination is a serious issue across every consumer credit market,” said CFPB Director Richard Cordray. “We are returning $80 million to hard-working consumers who paid more for their cars or trucks based on their race or national origin. We look forward to working closely with the Justice Department and Ally to make sure this serious issue will be addressed appropriately in the years ahead as well.”

Read more: CFPB and US DOJ order Ally to pay $80 million to car buyers

 

Good news for car buyers — Richard Cordray Confirmed!!

At last, in a huge, sweet victory for struggling consumers, Richard Cordray has been confirmed as Director of the Consumer Financial Protection Bureau. The CFPB, first envisioned by now-Senator Elizabeth Warren, was created to be a watchdog for consumers in the financial marketplace.

Democratic legislators in Congress created the agency when they voted for the Dodd-Frank Wall Street Reform Act, in the wake of the largest financial meltdown since the great Depression.

Since then, Republicans in Congress have tried repeatedly to weaken the agency and put it under their thumbs. That way, they could tie it in knots and keep it from doing its job.  Republican senators had blocked Cordray’s nomination for years, and relented only when Democratic Senators forced their hand, by threatening to change the filibuster rules that had allowed the Republican minority, at the behest of powerful, unscrupulous special interests, to block a vote on Cordray’s nomination and other nominations to vitally important posts that directly affect the lives of  ordinary Americans.

Cordray’s confirmation is a huge victory for President Obama, US Senator Elizabeth Warren,  the consumer and labor movements and allied groups, and other pro-consumer forces who joined together to form Americans for Financial Reform. And for all the individual consumers who petitioned Congress and spoke up for letting the agency do its job.

Republican members of Congress, and some Democratic members, led by US Rep. Gary Peters of Michigan, granted auto dealers a special exemption from the Consumer Financial Protection Bureau’s authority, under the false claims that they don’t engage in lending themselves (they do), and that they’re not traded on Wall Street (many of them are).

However, the CFPB does have authority to police auto lending. It may also act to curb lenders from taking away consumers’ Constitutional rights when they purchase a car, trapping them with “arbitration” clauses that keep them captive to a secret, private “arbitration” system that the lenders control.

This is welcome news indeed for the car-buying public. The agency has already issued a warning to auto lenders not to keep engaging in discriminatory lending practices that result in minority car buyers paying more for financing — not based on their creditworthiness, but on race.

The agency may also issue rules to curb auto dealer markups on interest rates, that cost car buyers over $25.8 billion annually in excessive interest charges pocketed by dealers and lenders — money that could be spent on technology that saves lives and helps clean the air and slow climate change.

If you have a complaint about auto lending, here’s where to complain at the CFPB:

Consumer Financial Protection Bureau–file a complaint here