News Column

Subprime car lender settles $5.5 million case with FTC fine, refunds to borrowers

May 30, 2014

By Lily Leung, The Orange County Register

May 30--Irvine-based automobile financing firm Consumer Portfolio Services has agreed to a $5.5 million settlement with the Federal Trade Commission over allegations it harassed borrowers and collected money that clients didn't owe, among other charges.

Consumer Portfolio Services, or CPS, is a national loan service provider whose primary customers are those with blemished or short credit histories.

The company buys vehicle-sales contracts from franchised dealers, funds them long-term and collects debts from about 110,000 borrowers.

The FTC alleges the company misrepresented fees owed during debt-collection calls and on billing statements, telling third parties about borrower debts and debiting money from bank accounts without consumer approval, among other claims.

As part of the settlement, CPS will pay $2 million in fines and refund or adjust 128,000 consumer accounts to the tune of more than $3.5 million.

"The law is very clear," Jessica Rich, director of the FTC's Bureau of Consumer Protection, in a statement. "Loan servicers can't charge consumers more than they owe. And they can't threaten and harass consumers about delinquent debts."

Company officials, who could not be immediately reached for comment, will start refunding money and adjusting accounts within the next 90 days, the FTC says.

The agency is telling consumers with questions to email or call 1-888-806-2367.

CPS, which boasts 700 employees, manages a nearly $1.3 billion loan portfolio, up 33 percent from the same time a year ago, according to its most recent financial statements.

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Source: Orange County Register (CA)

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