Maryland readers may be familiar with the Consumer Financial Protection Bureau, which accused an auto lender in a nearby state of employing aggressive debt collection tactics when its customers defaulted on their loans, many of whom were active-duty or former military. The auto lender accused of using illegal business practices, Security National Automotive Acceptance Co., denies any wrongdoing. Despite that fact, the company decided to enter into a settlement with federal officials.
Reportedly, approximately $2.28 million in refunds or credits must be made to consumers. In addition, the company must pay a fine in the approximate amount of $1 million. The company is also banned from using questionable debt collection practices, such as deception, threats and exaggeration. Reportedly, former and active-duty military members were told that they could be demoted, lose their security clearances or even be discharged for not paying their loans.
The CFPB reported that these tactics affected thousands of customers. The Ohio-based company reports that they actually affected no more than 2 percent of its customer base, which works out to be approximately 2,200 people, over the last five years. The company's statements could leave Maryland readers wondering why the company would settle.
This auto lender made the same decision that many companies make under similar circumstances. The cost and time associated with protracted litigation can cause more damage to a business than settling. As in this case in which the company was accused of illegal business practices, a negotiated part of any settlement could be the right for the settling party to deny wrongdoing. This allows the alleged injured parties to receive some sort of restitution while avoiding the risks and downfalls of litigation and, hopefully, maintaining a business's reputation.
Source: kentucky.com, "US: Ohio-based auto lender used illegal collection practices", Oct. 31, 2015