On April 26, 2017, the CFPB announced it had entered into a consent order (the “2017 Order”) with Security National Automotive Company, LLC (“SNAAC”).  The consent order, for the first time, imposes a $1.25 million fine for the violation of a prior CFPB consent order.  In October 2015, the CFPB issued a consent order against SNAAC (the “2015 Order”), finding that SNAAC, an auto-finance company specializing in loans to servicemembers, had engaged in unlawful acts and practices related to its debt collection activities.  The alleged acts or practices included making threats to contact servicemembers’ commanding officers with details of servicemembers’ debts and delinquencies, and making misleading statements regarding the consequences of servicemembers remaining delinquent.  The 2015 Order imposed a $1 million civil penalty, and required SNAAC to pay $2.275 million in consumer redress through credits and refunds.  For those consumers with an account balance, SNAAC was to provide credits to their accounts, while consumers with a zero balance were to receive cash refunds.

Following a tip from a servicemember’s father, the Bureau investigated SNAAC’s remedial activities pursuant to the 2015 Order and determined that SNAAC violated the 2015 Order by failing to provide more than $1 million in redress, which affected more than 1,000 consumers. According to the Bureau, SNAAC had submitted redress plans that purported to provide full redress, but was instead “designed to underpay such redress.” 

The 2017 Consent Order enumerates the manner in which SNAAC allegedly failed to meet its redress obligations:

  • Instead of providing refunds to consumers with “settled-in-full” accounts, SNAAC issued credits to those consumers. Those consumers received no benefit from their credits because they no longer owed money to SNAAC.
  • SNAAC issued credits to consumers whose debts had been discharged in bankruptcy and thus no longer owed money to SNAAC, rendering the credits “worthless” to those consumers.
  • SNAAC failed to administer redress properly to those consumers making payments under settlement agreements. For those consumers, the amount owed to SNAAC was the “settlement balance,” or the agreed upon settlement amount minus any payments made on the settlement. In administering redress, SNAAC did not use the settlement balance but instead used the higher balance that the consumer would have owed had it not entered into a settlement agreement. SNAAC’s method of crediting settlement balances resulted in some consumers overpaying SNAAC to settle their accounts.

As a result of SNAAC’s failures in meeting its redress obligations under the 2015 Order, the 2017 Order requires SNAAC to:

  • Pay to the CFPB $1,166,057, which includes:
    • $718,900 in refunds that the CFPB will distribute to “refund-redress” consumers;
    • $75,000 in administrative costs to the CFPB; and
    • $372,157 in account credits to be issued by SNAAC in equal amounts “credit-redress” consumers.
  • Pay a civil money penalty of $1.25 million, in addition to the $1 million penalty it paid under the 2015 Order.
  • Submit to the CFPB a comprehensive written plan for accomplishing the redress-related activities set forth in the 2017 Order.

SNAAC released a statement indicating that while it consented to the 2017 Order, it did not admit to its findings.