The Consumer Financial Protection Bureau has started to flex its muscle in another area of the car market: add-on products such as service contracts.
Last week the bureau ordered Minneapolis-based U.S. Bank and a partner to repay $6.5 million to military service members who got auto loans through a military-authorized program. That included $3.3 million in reimbursements for F&I products because the bureau concluded that the partner, Dealers' Financial Services of Lexington, Ky., "made deceptive statements regarding the cost of the add-on products and the scope of coverage of the vehicle service contract."
The action underscored what has become increasingly clear to the auto finance world in recent months: The 2-year-old bureau, empowered to regulate auto loans but not most auto dealers, sees F&I products as a key target for enforcement.
"It didn't take a lot of imagination to figure that they were going to be interested in that, when they had two large consent orders last year that related to the sale of ancillary products for credit card accounts," said Chris Willis, an Atlanta-based attorney at Ballard Spahr who has auto lending clients.
Neither U.S. Bank nor Dealers' Financial Services admitted wrongdoing. The bureau said it didn't levy any monetary penalties against the firms because they cooperated with the investigation.