Ancillary Product Rebates Draw CFPB Scrutiny


The Consumer Financial Protection Bureau continues to take a close look at ancillary products sold by captive finance companies to consumers who finance their used-car purchases.

The CFPB gave examples of some common issues in its latest supervisory examination highlights.

One area of concern is the rebate given when the consumer has included ancillary products, such as service contracts in the financing and then loses the car either through repossession or total loss.

If the product is cancelled as a result, a rebate is then payable to first the creditor and then the consumer. 

In many cases with service contracts, providers base the rebate on the miles driven.  The finance companies are supposed to use the net miles added after the purchase of the vehicle, but often they use the total miles.

This decreases the amount of the rebate and increases the deficiency balances, sometimes by hundreds of dollars.

The CFPB claims that attempts to collect inflated deficiency balances  “caused or was likely to cause substantial injury to consumers.”

Another issue us that while the finance company can request the rebate, they sometime fail to do so. This also results in higher deficiency balances.

This becomes a problem when deficiency notices claim to net out available “total credits/rebates.” In some cases, the CFPB considers this a deceptive act or practice.

The examinations showed that the average unclaimed rebate was roughly $1,700. 

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Last modified on Tuesday, 11 June 2019 22:42