An auto lender whose primary customers are active and retired military members says it was caught off guard by a lawsuit filed by the Consumer Financial Protection Bureau, as it was in the process of negotiating a settlement with the agency.
CFPB filed suit against Security National Automotive Acceptance Company, LLC, based in Mason, Ohio, alleging the lender used "aggressive debt collection" tactics against service members, including illegal threats and deceptive claims.
The complaint, filed June 17 in federal court in Ohio, alleges that Security National Automotive Acceptance Co. has threatened to contact — and has contacted — borrowers' commanding officers; made misleading statements about the potential career and tax liability impact if borrowers remained delinquent on their debt; and misrepresented its intention to take legal action and its ability to obtain involuntary allotments and garnishments.
SNAAC's actions violated the Consumer Financial Protection Act of 2010, CFPB alleges. A CFPB statement acknowledges that the bureau's allegations are not a finding or ruling that the company has actually violated the law.
Company officials said they were surprised by the lawsuit. "In fact, we were in active discussions with CFPB to better understand and resolve their concerns when we received news about the suit," according to a statement from SNAAC officials. "Nevertheless, we remain willing to work with them to resolve this matter as quickly as possible while continuing to proudly serve our military customers." After CFPB asked to review its policies and procedures about two years ago, SNAAC cooperated fully with the inquiry process and voluntarily adjusted some policies, processes and personnel, according to company officials.
According to the complaint, SNAAC operates in about 30 states, and lends money mostly to current and retired service members. The company purchases and services retail installment sales contracts originated by motor vehicle dealers. Those loans are made primarily for used vehicles.
Since at least July 21, 2011, when the CFPB became operational with jurisdiction over lenders such as SNAAC, that company has collected millions of dollars in consumer debt from thousands of service members through such sales contracts.
The agency is seeking compensation for borrowers it says were harmed, a civil penalty and an order prohibiting the company from committing further violations.
Many troops were unaware they had signed an addendum to their purchase contract that gave SNAAC permission to contact borrowers' "employer/commanding officer" to help collect in the event of default and for other purposes, according to the lawsuit.
The threat of contacting commanders has long been a tactic used by some lenders. Service members, commanders, legal assistance attorneys and others have expressed concern about the practice.
SNAAC "took advantage of military rules to put enormous pressures on service members to pay their debts," CFPB Director Richard Cordray said in announcing the lawsuit. "For all the security they provide us, service members should not have their financial and career security threatened by false information from an auto loan company."
In the statement from SNAAC, officials said, "when CFPB asked to review our policies and procedures (as they have done with many other consumer financial institutions) two years ago, we considered it an opportunity to get their feedback on our internal practices and identify any areas of improvement.
"Since then, we have cooperated fully with the CFPB's inquiry process and have voluntarily adjusted some of our policies, processes and personnel to ensure we are providing the very best service to our customers. We've done this despite our strong belief that our servicing efforts — both then and now — have complied with applicable law and were consistent with the creditor processes outlined by the Department of Defense."