Consumer Financial Protection Bureau Settles with Auto Lender for Unfair Loss Damage Waiver Practices
WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (Bureau) settled with Lobel Financial Corporation, an auto-loan servicer based in Anaheim, California. The Bureau found that Lobel engaged in unfair practices with respect to its Loss Damage Waiver (LDW) product, in violation of the Consumer Financial Protection Act (CFPA). When a borrower has insufficient insurance, rather than force-placing collateral-protection insurance, Lobel places the LDW product, which is not itself insurance, on borrower accounts and charges a monthly premium of approximately $70 for the LDW coverage. The LDW product provides that Lobel will pay for the cost of covered repairs and, in the event of a total vehicle loss, cancel the borrower’s debt. The Bureau found that Lobel continued to bill certain consumers for LDW coverage but then failed to provide it, and assessed fees from consumers that they were not obligated to pay. The order requires Lobel to pay $1,345,224 in consumer redress to approximately 4,000 harmed consumers and a $100,000 civil money penalty. The order also prohibits Lobel from failing to provide consumers with LDW coverage or similar products or services for which it has charged consumers or from charging consumers fees that are not authorized by its LDW contracts.
Lobel’s LDW agreement, which all Lobel borrowers must sign, specifies that if at any time the borrower fails to maintain car insurance subject to certain specifications, Lobel will add LDW coverage to the consumer’s account and impose a monthly charge. If a borrower becomes ten or more days delinquent on an auto loan with LDW coverage, Lobel may stop the LDW coverage. The Bureau’s investigation found that, since 2012, Lobel charged customers LDW premiums after they had become ten-days delinquent on their auto loans but did not provide them with LDW coverage. When these customers needed repairs or experienced total vehicle losses, Lobel denied their claims. This practice was unfair under the CFPA because consumers were charged for a service that they did not receive.
The Bureau also found that Lobel charged some customers LDW-related fees that Lobel had not disclosed in its LDW contract. This practice was also unfair under the CFPA.
The consent order is available at: https://files.consumerfinance.gov/f/documents/cfpb_lobel-financial-corporation_consent-order_2020-09.pdf
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.