Nation's Biggest Buy-Here, Pay-Here Dealer Fined $8 Million

It’s been a bad week for debt collectors who employ questionable tactics. The largest buy-here, pay-here car dealer in the nation must pay an $8 million civil penalty after an investigation by federal authorities found it had repeatedly harassed consumers and furnished incorrect information to credit bureaus.

DriveTime Automotive Group offers car purchase agreements that require purchasers to return to dealers to make payments — its average customer has poor credit. The firm operates in 20 states and, as of December 2013, had 150,000 outstanding car loans. A remarkable 45% of DriveTime’s auto installment loans were delinquent at any time, according to the Consumer Financial Protection Bureau, which conducted the investigation.

The news comes one day after the Justice Department announced criminal charges against a debt collection company based in Georgia, accusing the firm of impersonating government officials while trying to collect debts. The firm, Williams, Scott & Associates, allegedly netted $4.1 million from 6,000 victims using such illegal pressure tactics.

‘Countless Consumers’ Affected

The CFPB said today’s case against DriveTime was the first involving buy-here, pay-here dealers.

“DriveTime harassed and harmed countless consumers, many of whom were economically vulnerable,” said CFPB Director Richard Cordray. “Our action today forces DriveTime to pay the price for its illegal debt collection tactics and for neglecting the accuracy of consumers’ credit information.”

Asked for comment, Jon Ehlinger, DriveTime executive vice president and general counsel said: “We are pleased to have a resolution to the Consumer Financial Protection Bureau (CFPB) investigation, and appreciate and acknowledge the professionalism shown throughout the process by the CFPB and its enforcement staff. . . .

“DriveTime strives to comply with all applicable laws and provide exemplary service to our customers. Over the last several years, prior to the initiation of the CFPB investigation, DriveTime had taken and has continued to take steps to enhance its customer experience, and loan servicing activities, including the handling of do not call requests and credit reporting. We look forward to an ongoing relationship with the agency, and hope to establish a constructive dialogue designed to improve our customer service and compliance practices in the years ahead.”

On its website, the Phoenix-based firm says it has sold 500,000 cars.

DriveTime had at least 290 collection employees in two domestic call centers and 80 contractors in Barbados, the CFPB said.

Among the allegations made Wednesday by the CFPB:

Consumers were called at work and DriveTime refused to honor no-contact requests, required under the Fair Debt Collection Practices Act. “One consumer was unfairly called 30 times at work after her do-not-call request,” the CFPB said.
DriveTime requires consumers to provide at least four references when they apply for financing; the firm called these references “for months” while attempting to collect debts, even after buyers asked DriveTime to stop, according to the CFPB.
DriveTime inaccurately reported collections information to credit bureaus — in some cases making repossessions appear more recent than they really were, damaging consumers’ credit scores. The firm also did a poor job of correcting inaccurate information on credit reports. “DriveTime informed the consumers in writing that the information had been corrected, when it had not been,” the CFPB said.

The CFPB consent order requires DriveTime to pay an $8 million civil penalty, end its unfair debt collection tactics, fix its credit reporting practices and arrange for affected consumers to obtain free credit reports.