Regulator closes down subprime auto lender

The New York Department of Financial Services (NYDFS) has slapped a £3 million penalty on subprime auto lender Condor Capital and ordered the company to repay an estimated £8 million in restitution to borrowers, after which it will be closed down.

Long Island-based Condor Capital is required to surrender its licenses in all states and will be liquidated following the state regulator’s legal action, the first to be brought under the Dodd-Frank Act to enforce federal consumer protection laws.

The company and its sole shareholder, Stephen Baron, was found to have deceptively retained millions of dollars owed to vulnerable borrowers and overcharged them for interest in violations of Dodd-Frank, the Truth in Lending Act, the New York Banking Law, and the New York Financial Services Law.

The NYDFS said Condor concealed from its customers and the department the fact that thousands of its customers had refundable positive credit balances as a result of an overpayment of the customer’s account). Condor retained these positive credit balances for itself and maintained a policy of failing to refund positive credit balances except when expressly requested by a customer.

Condor did not notify its customers when positive credit balances remained in their accounts at the conclusion of their loans. Furthermore, Condor programmed its website to terminate customers’ access to their account information once their loans were terminated, even if the customers had positive credit balances in their accounts.

Condor was also found to calculate the interest it charged its customers based on a 360-day year and applying the resulting daily interest rate to its customers’ loan accounts each of the 365 days during the year. This practice resulted in a difference in its customers’ APR in excess of the one-eighth of one percent tolerance permitted under the Truth in Lending Act. Despite being informed that this practice broke the law, the regulators found that on multiple occasions Condor attempted to add an additional one-eighth of one percent interest back to customers’ accounts.

The NYDFS also charged Condor with repeated lapses in the security of its customers’ personally identifiable information, including leaving stacks of hard-copy customer loan files lying openly around the common areas of company offices.

Benjamin M. Lawsky, NYDFS superintendent of financial services, said: “We will not tolerate companies that abuse New Yorkers and other customers—particularly vulnerable subprime borrowers who can least afford it. This case demonstrates that the Dodd-Frank Act provides a powerful new tool for state regulators to pursue wrongdoing and obtain restitution for consumers who were abused. We hope other regulators across the country will consider taking similar actions when warranted.”