The U.S. Supreme Court ruled that the head of the Consumer Financial Protection Bureau can be fired by the President and that the structure of the body violates the Constitution’s separation of powers.

“We hold that the CFPB’s leadership by a single individual removable only for inefficiency, neglect, or malfeasance violates the separation of powers,’” The Court stated.

The decision allows the President to fire the head of the agency at will but does allow the agency to continue to operate.

The case, Seila Law v. CFPB, involved a challenge to the constitutionality of the CFPB’s structure, an independent agency led by a single director. The CFPB is funded by the Federal Reserve – not Congress. Its director, while serving a five-year term can only be removed for cause, unlike other political appointments.

Since the CFPB’s inception in 2011, following the 2008 financial crisis, it  has been a political lightning rod.

The National Independent Automobile Dealers Association has sparred with the bureau in recent years over two issues: arbitration and open recalls.

President Donald Trump’s Justice Department asked the Supreme Court to take up the issue after the U.S. Court of Appeals for the District of Columbia Circuit Court ruled the CFPB’s structure constitutional.

The California Assembly voted down a bill that would have had a huge negative impact on the state’s auto finance industry.

AB 2501 – the COVID-19 Homeowner, Tenant and Consumer Relief Law of 2020 – was defeated by a 28-25 vote on June 15 and the Assembly adjourned its session without taking up a motion to reconsider the measure.

The bill, sponsored by Assembly Banking and Finance Committee chairwoman Monique Limón, would have prohibited creditors from repossessing vehicles until Jan. 1, 2023, and required them to provide loan forbearance for up to nine months for customers unable to make payments.

Repossessions would have been halted under AB 2501
Repossessions would have been halted under AB 2501

The Independent Automobile Dealers Association of California worked with the National Independent Automobile Dealers Association to oppose AB 2501, noting its passage would drastically reduce the ability of independent dealers and auto finance companies to extend credit to consumers – especially credit-challenged individuals.

“We couldn’t be happier with the actions of the Assembly,” IADAC executive director Larry Laskowski said. ”There really was no upside to the bill. The economic impact would have been enormous. 

“Thanks to the action of IADAC and NIADA and other groups, members of the Assembly were able to make the right choice and defeat this potentially disastrous bill.”

In a letter to Limón and members of the Assembly, NIADA pointed out auto lenders assume significant risk in extending credit, which is minimized only by their ability to repossess the collateral in the event of a default. Without that ability they would be far less likely to provide credit – and those most likely to be harmed by that would be the most vulnerable and financially disadvantaged consumers.

The Federal Trade Commission is taking legal action to halt a scheme where consumers were directed to a site where they could obtain federal COVID-19 stimulus benefits, which turned out to be a used car sale.

The mailers sent by Traffic Jam Events LLC and its owner, David J. Jeansonne II, were labeled “IMPORTANT COVID-19 STIMULUS DOCUMENTS” and directed consumers to “relief headquarters” to “claim these stimulus incentives,” the FTC alleged in its lawsuit against the company and Jeansonne.

Attorney General Ashley Moody’s Consumer Protection Division filed a legal complaint and injunction against a Tampa advertising agency for mailing used car promotions that resembled COVID-19 stimulus checks
Florida Attorney General Ashley Moody filed legal action April 23rd

The mailers led consumers to believe they could obtain stimulus relief temporarily in person, making multiple references both to the coronavirus pandemic and to a supposed economic stimulus program similar to the program enacted under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the FTC alleged.

According to the complaint, the defendants’ mailers referred to an address in Florida as “relief headquarters” and “designated local headquarters,” telling consumers that they must “must claim these stimulus incentives at your designated temporary 10-day site...” The mailers also include a likeness of the Great Seal of the United States, as well as a mock check, labeled “Stimulus Relief Program.” When consumers arrived, however, they only found a lot hosting a car sale.

The FTC’s complaint notes that the defendants have been the subject of prior law enforcement actions in Kansas and Indiana, and that they are currently facing action from the state of Florida related to these mailers. The FTC’s suit asks the court to stop the defendants’ actions and to require them to provide redress to consumers. The complaint was filed in the U.S. District Court for the Eastern District of Louisiana.

Pennsylvania Attorney General Josh Shapiro announced a $50,892.29 settlement that allows restitution for consumer victims of a Mechanicsburg car dealership, New Kingstown Auto, LLC, the owner of the dealership, Harry D. Laughman, and an employee, Dana L. (Blosser) San.

The settlement, in the form of a petition requiring court approval, comes as a result of a lawsuit filed by the Office of Attorney General’s Bureau of Consumer protection alleging that the defendants: advertised used motor vehicles for sale without disclosing the business name and address of the advertiser or the word “dealer”; sold a used motorcycle as having 69,000 miles, when in fact the motorcycle had 153,000 miles; sold motor vehicles without a valid dealer or salesperson license; failed to forward to Penn DOT money and forms submitted by a consumer; engaged in lease transactions with consumers that did not include required disclosures and were not compliant with applicable laws; accepted installment payments from consumers on vehicles without holding the required installment seller license and provided a consumer an installment sale contract that did not comply with requirements.

“Unscrupulous business dealers can’t dodge our Bureau of Consumer Protection,” said Shapiro. “I’m grateful for their hard work to put a stop to the defendants’ shady practices and deliver results for the people of Pennsylvania.”

New York City car dealer Bronx Honda and its general manager, Carlo Fittanto, will pay $1.5 million to settle Federal Trade Commission charges they discriminated against black and Hispanic car buyers and engaged in numerous other illegal business practices.

Bronx Honda dealership to pay $1.5M
Bronx Honda dealership to pay $1.5M in fines.

According to the FTC complaint, the defendants told salespeople to charge higher financing markups and fees to black and Hispanic customers. The defendants told employees that these groups should be targeted due to their limited education, and not to attempt the same practices with non-Hispanic white consumers. The complaint alleges that black consumers were charged about $163 more in interest than similarly situated non-Hispanic white consumers, while Hispanic consumers were charged about $211 more in interest.

In addition to alleged racial discrimination, the defendants are charged with numerous illegal practices in the advertising and sales process that caused consumers to pay substantially more than they expect. The complaint alleges that the defendants violated the FTC Act, the Truth in Lending Act and the Equal Credit Opportunity Act. In addition to the $1.5 million payment that will be used to provide redress to consumers, the settlements also prohibit Bronx Honda and Fittanto from misrepresenting the cost or terms to buy, lease, or finance a car, or whether a fee or charge is optional. They will also be required to establish a fair lending program that will, among other components, cap the amount of additional interest markup they can charge consumers.

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