WASHINGTON, D.C. –
Last week, Lobel Financial Corp. finalized a settlement with the Consumer Financial Protection Bureau totaling more than $1.4 million.
According to a news release, the bureau found that Lobel engaged in unfair practices with respect to the finance company’s loss damage waiver (LDW) product in violation of the Consumer Financial Protection Act (CFPA).
When a contract holder has insufficient insurance, rather than force-placing collateral-protection insurance, the CFPB said Lobel places the LDW product. The bureau said this product is not itself insurance on accounts and charges a monthly premium of approximately $70 for the LDW coverage.
Officials explained the LDW product provides that Lobel will pay for the cost of covered repairs and, in the event of a total vehicle loss, cancel the contract holder’s debt.
The CFPB said it found that Lobel continued to bill certain consumers for LDW coverage but then failed to provide it, and assessed fees from consumers that they were not obligated to pay.
The order requires Lobel to pay $1,345,224 in consumer redress to approximately 4,000 harmed consumers and a $100,000 civil money penalty.
The order also prohibits Lobel from failing to provide consumers with LDW coverage or similar products or services for which it has charged consumers or from charging consumers fees that are not authorized by its LDW contracts.
The regulator said Lobel’s LDW agreement — which all Lobel contract holders must sign — specifies that if at any time the contract holder fails to maintain car insurance subject to certain specifications, Lobel will add LDW coverage to the consumer’s account and impose a monthly charge.
If a contract holder becomes 10 or more days delinquent on a contract with LDW coverage, Lobel may stop the LDW coverage, according to the CFPB.
The bureau went on to say that its investigation found that since 2012 Lobel charged customers LDW premiums after they had become 10 days delinquent but did not provide them with LDW coverage.
“When these customers needed repairs or experienced total vehicle losses, Lobel denied their claims,” the CFPB said. “This practice was unfair under the CFPA because consumers were charged for a service that they did not receive.”
The bureau also found that Lobel charged some customers LDW-related fees that the finance company had not disclosed in its LDW contract.
“This practice was also unfair under the CFPA,” the CFPB said.
The entire consent order can be viewed here.