CFPB Director Rohit Chopra said about 1,000 households lost their cars to repossession because banks “illegally added excessive fees to auto loan invoices.”
“We are ordering Fifth Third’s senior management and board of directors to clean up these poor business practices or face further punishment,” Chopra said.
The bank said it had already voluntarily discontinued the auto insurance practices cited by the CFPB in 2019, before the bureau began its investigation.
“We have already taken significant steps to address these past issues, including identifying the issues and working to remedy them,” Fifth Third Bank’s chief legal officer, Susan Saumbrecher, said in a statement.
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This is the CFPB’s latest action against the bank, which was charged in 2020 with fraudulently opening accounts from 2010 through at least 2020. Fifth Third agreed to pay $15 million on Tuesday to address those allegations.
The allegations over insurance policies are a separate issue and stem from the banking sector, which works with car dealers to provide car loans.
Fifth Third’s auto loans have included “collateral protection insurance” for many years. The CFPB has rules that allow them to automatically add insurance to customers who don’t have their own insurance, a practice it calls “forced insurance.”
The provision was intended to give banks a way to protect the cars themselves, which are collateral for loans. But more than half of the insurance the banks forced on them went to customers who already had insurance or who had taken out new insurance within 30 days of their previous insurance expiring, the CFPB said.
“For years, Fifth Third has engaged in forced insurance purchases, requiring consumers to pay premiums they did not need or face delinquency, additional fees and even foreclosure,” the agency alleged.
The CFPB said these policies charge higher premiums than owners could get elsewhere and increase borrowers’ monthly auto loan payments by about $200 on average.
The CFPB said the charges were illegal, causing some customers to default on their loans and leading to 1,005 customers having their vehicles repossessed. The mandatory insurance program ended in 2019, according to the CFPB and the banks.
