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The CARLAWYER ©

By Eric Johnson, Partner in the law firm of Hudson Cook, LLP, Editor in Chief of CounselorLibrary.com’s Spot Delivery®

Here’s our monthly article on selected legal them from misrepresenting any material instituted in conformity with the ECOA
developments we think might interest fact while marketing any product or and Reg. B generally do not violate the Fair

the auto sales, finance, and leasing world. service of any kind, as well as from any Housing Act. Accordingly, creditors may
This month, the developments involve the further violations of TILA’s disclosure consider the use of special purpose credit
Federal Trade Commission, Consumer requirements. programs across all types of credit covered
Financial Protection Bureau, Federal by ECOA and Reg. B.
Reserve Board, Federal Deposit Insurance CFPB Allows Public to Submit Petitions
Corporation, National Credit Union for Rulemaking. On February 16, to FTC Reports on 2021 ECOA Efforts.
Administration, Office of the Comptroller broaden access to the agency’s rulemaking On February 23, the FTC provided its
of the Currency, Department of Housing process, the CFPB announced that annual letter to the CFPB summarizing its
and Urban Development, Department members of the public can now submit enforcement actions, research and policy
of Justice, and Federal Housing Finance petitions for rulemaking directly to the initiatives, and education efforts in 2021
Agency. As usual, our article features agency. The CFPB states that “[w]hile related to the Equal Credit Opportunity Act.
the “Case(s) of the Month” and our members of the public have long had the
“Compliance Tip.” Note that this column ability to comment on rules and other CFPB Issues Blog Post on Auto
does not offer legal advice. Always check initiatives, many individuals and small Financing. On February 24, in response
with your lawyer to learn how what we businesses believe that they must hire to the increasing cost of automobiles and
report might apply to you or if you have former government officials, lawyers, or the potential for consumer debt related
questions. lobbyists in order to be heard by an agency.” to auto financing to increase, the CFPB
The petitions for rulemaking will be posted issued a blog post stating its intent to
FEDERAL DEVELOPMENTS on public dockets for review and comment. “focus on ensuring a fair, transparent, and
competitive auto lending market.” In line
FTC Bans Marketing Company from Agencies Release Statement on with its goal to ensure affordable credit for
Auto Industry. On January 28, the FTC Establishing Special Purpose Credit auto purchases, the CFPB states: “Given
issued an opinion and final order in a Programs. On February 22, the FRB, FDIC, the increase in loan amounts, the rising
case against a marketing company, Traffic NCUA, OCC, CFPB, HUD, DOJ, and FHFA length of loan terms, and the uncertainty
Jam Events, LLC, and its owner, finding issued an interagency statement to remind around the ongoing economic recovery, we
that the defendants falsely claimed in creditors of the ability under the Equal will be closely monitoring lender practices
direct mail advertisements to be affiliated Credit Opportunity Act and Regulation B and consumer outcomes. In particular, we
with a government COVID-19 stimulus to establish special purpose credit programs continue to evaluate lending structures
program. The FTC also determined that to meet the credit needs of specified classes where lenders seem to rely on high
the advertisements deceptively stated of persons. The interagency statement calls interest rates and fees to profit even when
that consumers had won specific prizes, attention to the special purpose credit consumers fail. We are also concerned
including large cash prizes, that they options under ECOA and Reg. B. On about loan-to-value ratios in the auto
could collect if they visited certain car December 21, 2020, the CFPB issued an loan market.” The CFPB also intends to
dealerships, which was not the case once advisory opinion on special purpose credit monitor servicing and collection practices
they went to claim the prizes. Further, the programs to clarify the content that a for- by auto finance companies, including a
FTC found that the defendants continued profit organization must include in a written focus on servicemember protections and
their unlawful conduct despite entering plan that establishes and administers a technologies used to assist the companies
into three prior consent orders with state special purpose credit program under in repossessing vehicles. Finally, the
regulators. In addition to these violations of Reg. B. In addition, the advisory opinion CFPB states that it will focus on ensuring
the FTC Act, the FTC also found that the clarified the type of research and data that competition in the subprime auto financing
defendants violated the Truth in Lending may be appropriate to inform a for-profit market.
Act by failing to satisfy the Act’s disclosure organization’s determination to establish a
requirements for advertising closed-end special purpose credit program to benefit a CFPB Is Concerned About Wrongful
credit. The order bans the defendants from specified class of persons. On December 7, Repossessions. On February 28, the CFPB
advertising, selling, or leasing automobiles 2021, HUD released guidance concluding issued a Compliance Bulletin to remind
for 20 years. The FTC’s order also prohibits that special purpose credit programs vehicle-secured creditors and their servicers

12 | MIDATLANTIC DEALER NEWS | MIDATLANTICAUTODEALERSUNITED.ORG • APRIL 2022