The Consumer Financial Protection Bureau (CFPB) filed a complaint in federal court against Security National Automotive Acceptance Company (SNAAC) for allegedly using aggressive debt collection tactics against servicemembers.
“Security National Automotive Acceptance Company took advantage of military rules to put enormous pressures on servicemembers to pay their debts,” CFPB Director Richard Cordray said. “For all the security they provide us, servicemembers should not have their financial and career security threatened by false information from an auto loan company.”
According to the complaint, SNAAC violated the Dodd-Frank Act’s prohibitions against unfair, deceptive and abusive acts and practices (UDAAP) when its debt collectors allegedly told servicemembers that they would contact their commanding officers about their debts, characterized delinquencies as violations of Department of Defense and other military regulations, and told servicemembers that delinquencies could result in legal action under the Uniform Code of Military Justice (UCMJ).
The CFPB said SNAAC took advantage of servicemembers’ special obligations to remain current on debts and buried within fine-print a contract provision saying that it could contact commanding officers about servicemembers’ debts.
The CFPB alleged that many consumers were unaware of the provision or it did not understand the pressure that would be brought to bear on them because of it. This tactic, the CFPB alleged, took advantage of the servicemembers’ inability to protect their interests in their transactions with the company and was unfair.
“Once consumers 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 stated.
The CFPB also alleged that SNAAC implied to consumers that it could immediately commence an involuntary allotment or wage garnishment.
“But such consequences could not or would not occur because, through the military pay system, involuntary allotments are only processed once a judgment by a court is obtained. The company would threaten to pursue an involuntary allotment before they had even determined whether the servicemember would be sued,” the CFPB said.
The complaint filed is not a finding or ruling that SNAAC actually has violated the law.
On June 10, the CFPB issued a final rule for overseeing certain nonbank auto finance companies that fall within the definition of a larger participant in the auto lending market.