CFPB Lawsuit Against Subprime Auto Lender Seeks To Regulate Through Enforcement

On January 4, 2023, the Consumer Financial Protection Bureau ("CFPB") and New York Attorney General ("NYAG") filed a complaint in the Southern District of New York against a Michigan-based subprime indirect auto lender accusing it of, among other things, misrepresenting the true cost of credit and improperly incentivizing dealers to mislead consumers into purchasing add-on products. The company's side of the story isn't public at this point, but the legal theories asserted in the complaint raise serious concerns about the CFPB using its UDAAP authority to attempt to impose new requirements that contradict or add to existing law.

The 59-page complaint makes a slew of allegations concerning alleged misconduct by the company, such as encouraging dealers to finance consumers who are not expected to be able to repay and failing to police alleged dealer misconduct. We focus here on three legal theories that exemplify "pushing the envelope" of the CFPB's authority.