By Nicole D. Prysby, J.D.
The Bureau settled allegations that the Texas company misled consumers by creating the impression that they would save money with the auto loan payment plan when in reality the program fees generally outweighed the interest savings.
The Consumer Financial Protection Bureau has settled with SMART Payment Plan, LLC, over allegations that SMART’s disclosures of its loan payment program contained misleading statements in violation of the Consumer Financial Protection Act’s prohibition against deceptive acts or practices. The consent order imposes a judgment against SMART requiring it to pay $7,500,000 in consumer redress and requirements to prevent future violations, suspended upon SMART’s payment of $1,500,000 by December 31, 2020, and a $1 civil money penalty to the Bureau.
The SMART plan. SMART, based in Austin, Texas, operates a loan payment program for auto loans called the SMART Plan that deducts payments from consumers’ bank accounts every two weeks and then forwards these payments every month to the consumers’ lenders. SMART provided consumers individualized "benefits summaries" that purported to state a specific amount of interest savings consumers would get by enrolling in the SMART Plan, but SMART’s fees ordinarily exceeded the savings. SMART’s disclosures thus created the misleading impression that consumers would save money using its product.
Consent order. According to the consent order, SMART markets the SMART Plan as a program that purports to allow consumers to pay off loans faster and more cheaply by making automatic partial payments that match their paydays with bi-weekly payments instead of monthly payments. SMART enrolled over 180,000 consumers in the program, and charged a $399 membership fee as well as a $1.95 bi-weekly debit fee. SMART claimed in its individualized benefits disclosures that the SMART Plan would cause consumers to save money on their auto loans, but failed to disclose that its fees would ordinarily exceed the interest savings. SMART therefore created the misleading impression that consumers would save money using its product, when most of SMART’S consumers lost money by paying more in fees to participate than the SMART Plan delivered in interest savings.
SMART stipulated to the issuance of the consent order, under which it is prohibited from making any misrepresentations about its payment programs. SMART must account for the total costs for its payment programs, as well as the net savings or costs after deducting any fees, whenever it makes claims about savings or financial benefits. SMART must comply with recordkeeping and reporting obligations. The suspension of the full $7,500,000 payment for redress is based on SMART’s demonstrated inability to pay more based on sworn financial statements.
Companies: SMART Payment Plan, LLC
MainStory: TopStory CFPB DebtCollection EnforcementActions Loans OversightInvestigations TexasNews
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