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FTC crackdown on Consumer Portfolio Services start of 'regulatory onslaught'

Last week’s consent order with subprime lender Consumer Portfolio Services marks the first time in recent memory that the Federal Trade Commission has gone after an auto lender for fairness in collections and loan servicing rather than discrimination in loan originations.

But it won’t be the last, attorneys say.

“This is the beginning salvo in a regulatory onslaught,” says John Culhane Jr., a Philadelphia-based partner with Ballard Spahr law firm, whose clients include auto lenders.

Lawyer Ken Rojc agrees. “This clearly demonstrates the FTC is going to be very active in this arena,” says Rojc, managing partner in charge of the auto finance group at Nisen & Elliott law firm in Chicago.

The consent order calls for Consumer Portfolio Services to pay more than $3.5 million in refunds or adjustments to more than 128,000 consumer accounts and to cease collections on an additional 35,000 accounts. The company also agreed to a civil penalty of $2 million, the FTC said.

Consumer Portfolio Services, based in Irvine, Calif., makes loans to customers with subprime credit via about 16,000 dealerships in 48 states. Two thirds are franchised, new-car dealerships; the rest are independent, used-car stores. In 2013, 91 percent of contracts were for used cars, and 9 percent new cars, the company says.

In the May 28 consent order, the lender neither admits nor denies any allegations. In a complaint filed the same day, the FTC accused Consumer Portfolio Services of a long list of loan-servicing and debt-collection violations.

They included misrepresenting or not clearly and conspicuously disclosing fees consumers owed, failing to disclose the financial effects of loan extensions, disclosing consumers’ debts to third parties, phoning consumers at work when not permitted, and falsely threatening repossessions.

The FTC also ordered Consumer Portfolio to establish a comprehensive data integrity program to make sure its account information is correct and complete.

Charles Bradley Jr., CEO of Consumer Portfolio Services, said the costs for the consumer refunds and the civil penalty are covered by a legal provision expense the company had already set aside.

He said the company changed several systems and procedures related to the FTC’s comments. “We are pleased to have resolved the matter with the FTC,” he said in a statement.

You can reach Jim Henry at

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