Consumer Financial Protection Bureau takes aim at auto lender

The Consumer Financial Protection Bureau (CFPB) has ordered auto lender Security National Automotive Acceptance Company (SNAAC), which specializes in loans to military personnel, to pay £3.28 million over its use of illegal debt collection practices.

The agency says the company must refund or credit about $2.28 million to servicemembers and other consumers who were allegedly harmed, as well as a penalty of $1 million. A separate court order bans SNAAC from using aggressive tactics, such as exaggeration, deception, and threats to contact commanding officers, to coerce servicemembers into making payments.

CFPB director Richard Cordray said: “Servicemembers should not be forced to pay because a debt collector used deceptive pressure tactics.”

Ohio-based SNAAC operates in more than two dozen states, lending money primarily to active duty and former military to buy used motor vehicles. The CFPB sued SNAAC in June 2015, claiming the company was taking advantage of servicemembers’ special obligations to remain current on debts.

Both active duty and former servicemembers could encounter trouble with the company if they missed or were late on payments, the CFPB alleged. Once servicemembers defaulted, they became subject to repeated threats to contact their chain of command. In many other instances, the company exaggerated the consequences of not paying.

Thousands of people were victims of the company’s aggressive tactics, the CFPB said, which included telling customer that their failure to pay could result in adverse career consequences, including demotion, loss of promotion, discharge, denial of re-enlistment, loss of security clearance, or reassignment. In fact, these consequences were extremely unlikely.

In addition, the company buried a provision within the fine print of contracts saying that it could contact commanding officers about servicemembers’ debts, and then went on to suggest potential defaulters were in violation of military law.

SNAAC was also found to have misled servicemembers about its ability to take money from their pay accounts and its intention to take legal action.

SNAAC has neither admitted nor denied the allegations.