CFPB Files Lawsuit Against a BHPH Lender
GPS Best Practices
At the heart of the CFPB's lawsuit is the accusation that the auto group's related finance company activated GPS technology, often referred to as “starter interrupters,” to remotely disable borrowers' vehicles. These actions allegedly occurred even when borrowers were not in default or had informed the loan servicer about impending payments.
When used correctly and in compliance with the applicable laws and regulations, GPS technology can be a very useful tool for lenders to track and encourage timely payments from borrowers. TIADA spoke with a few GPS providers who offered some best practices to help auto lenders using GPS devices stay compliant. These providers did not comment on the CPFB lawsuit, as they are unaware of the underlying facts of the case and as it remains an ongoing legal dispute.
For dealers who use GPS systems, there are some general guidelines to follow:
Verify your GPS partner is compliant with the most current laws and regulations.
Disclose the use of a GPS system to your customers.
Implement and document the right processes.
Ensure your collection team fully follows GPS policy guidelines.
Corrine Kirkendall, EVP of Compliance and Regulatory Affairs at PassTime, said, “The most important thing that can be communicated to the consumer is disclosure. Dealers must talk about the device and it is a stipulation of them receiving credit.”
When it comes to starter interrupters, Efrat Bogoslavsky, Vice President of Revenue and Service at Ituran, emphasized a few specific best practices when it comes to compliance. “Make sure that your GPS partner is following the guidelines as set forth in the Safeguard Rules and Gramm-Leach Bliley Privacy Notice.” Bogoslavsky also stressed employee training. “You can never train your team too much,” she said. “Be sure to execute training refresh once a quarter and document it in your GPS binder. Verify that your GPS partner is offering unlimited training and support. You must also try all communication methods prior to using the starter disable and make sure that you use it only when the loan is in default.”
“The CFPB's most recent action drives home the necessity to disclose the use of starter-interrupt on your collateral,” said Michelle Jackson, Vice President of Sales at Advantage GPS.
“Having documented policies and procedures are requirements under the new Safeguard Rules when it comes to starter-interrupt technology and repossessions,” Jackson said. “Your collections teams must be well-versed in the requirements and rules. Multiple managers should be involved when initiating a starter interrupt, and your legal counsel or an accredited compliance consultant should assist with writing rules and documenting customer interactions. TIADA is a valuable resource and assists dealers across the state with training and classes.”
One final bit of advice Kirkendall offered involves the issue of sales tax on GPS units. TIADA has covered this issue on our blog and in Texas Dealer magazine, but Kirkendall reiterated that the devices are taxable. “It is so important in the GPS industry to discuss this with dealers. And there are many dealers that are getting hit for those back taxes.”
The Road Ahead for Independent Auto Dealers
The CFPB's legal action against the independent auto group's finance arm is a powerful reminder of the agency's heightened enforcement efforts and for independent automobile dealers about the importance of fostering ethical practices, transparent dealings, and consumer-centric approaches.