More subprime lenders are on the hot seat

Three regulatory agencies -- two in New York and the Consumer Financial Protection Bureau in Washington -- have taken distinct actions recently against three different subprime auto lenders.

The CFPB last week announced a consent order with DriveTime Automotive Group and its finance company, DT Acceptance Corp. of Phoenix.

The bureau said the buy-here, pay-here organization was responsible for harassing debt collection calls and for providing inaccurate credit information to credit reporting agencies. The latter is a violation of the so-called Furnishers Rule.

The CFPB said DriveTime agreed to pay $8 million in penalties.

It’s not the only time the CFPB has taken action against a subprime auto lender based on the Furnishers Rule. The bureau cited the rule in August in a consent order with First Investors Financial Services Group of Houston. Under the rule, lenders are responsible for furnishing accurate customer data to credit reporting agencies.

The Federal Trade Commission has also used the rule, citing it in July in a consent order with subprime lender Consumer Portfolio Services.

Citywide probe

The New York City Department of Consumer Affairs said last week it was investigating Dallas-based subprime lender Santander Consumer USA and used-car retailers in the city, including automakers’ franchised dealers.

The city said it is exploring alleged “predatory” lending practices, including “selling expensive and unwanted add-ons”; whether dealerships provided adequate disclosures about interest rates; plus Santander’s “debt collection practices.”

That last part could echo separate settlements between federal agencies and other subprime auto lenders over phone calls to debtors and the accuracy of the customer data lenders furnish to credit reporting agencies.

A spokeswoman for Santander Consumer declined to comment.

The New York City Department of Consumer Affairs said last week that under its jurisdiction any business that sells more than five used cars per year must get a license from the department. The definition fits 849 businesses, according to the department.

Separately last month, the city also announced a settlement agreement with Planet Automotive Inc., which requires the used-car dealership to pay $441,000 -- $157,000 in fines and $284,000 in refunds -- to just 39 customers.

That case was part of a citywide investigation launched in July into whether dealerships sold used cars that were subject to recall without performing the recall work. The city said at the time it issued subpoenas to 200 dealerships.

State action

In yet another case, Capital One Financial Corp said in a quarterly report this month it had received a subpoena from the New York state district attorney’s office about its subprime auto finance business.

“Capital One is cooperating with the investigation,” the lender said in the report.

You can reach Jim Henry at

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