An auto lender that specializes in loans to military members in multiple states -- including Georgia -- is in trouble again.
The Consumer Financial Protection Bureau took action Wednesday against Ohio-based Security National Automotive Acceptance Co. for violating a 2015 consent order related to the company's illegal debt collection practices. The lender, which operates in more than two dozen states, was punished in 2015 for threatening to call its customers' commanding officers about debts. The company also exaggerated the potential consequences of failing to make loan payments, the agency found.
This time, the consumer agency found that the lender failed to provide refunds and credits that were part of its 2015 agreement. The new action requires the company to make good on its promises and pay an additional penalty of $1.25 million.
"This company violated a Bureau order when it failed to get money back to service members it had hounded with illegal debt collection tactics," said Richard Cordray, director of the Consumer Financial Protection Bureau. "We are making sure this company finally rights its wrongs."
The company focuses on financing loans for used cars sold to soldiers. The company's debt-collection tactics victimized thousands of service members by calling commanders -- or threatening to do so -- if borrowers fell behind on payments. The company also told borrowers that a failure to pay could lead to official military action resulting in demotion, discharge or loss of a security clearance, according to the consumer agency. Those punishments were extremely unlikely, the consumer agency determined.
Instead of actually paying $2.275 million in consumer redress, as ordered by the 2015 agreement, the company took another approach. In many cases, instead of paying actual refunds, the company issued worthless "credits" to accounts that were already settled. The consumers did not benefit from the "credits" because they did not owe the company money and couldn't use the credits.
The company also issued worthless credits to consumers whose debts had already been discharged through bankruptcy, the consumer agency reported.
It also mishandled some consumers who deserved redress who were still making payments, the consumer agency reported.
Now, the company must pay the Consumer Financial Protection Bureau about $720,000 that the agency will use to send refunds to about 925 consumers. The company must also issue new credits to over 1,000 consumers with remaining balances, and properly credit other consumers making payments under the settlement agreement.
Those payments are in addition to the new $1.25 million penalty, that is on top of the $1 million penalty it paid the agency under the 2015 agreement.
In a statement emailed to the AJC late Wednesday, Security National said the settlement resolves a "disagreement" between the lender and the consumer agency over the interpretation of the 2015 order. The company said it agreed to the settlement to resolve the matter and continue its tradition of serving borrowers in a "respectful, honorable matter."
The consumer agency discovered that the company was issuing the worthless "credits" after receiving a tip from a service member's father.
It was Tim Albright's call that prompted the investigation.
Albright’s son, who served in the U.S. Army, had obtained financing from Security National to buy a used Dodge when he was stationed at Ft. Bragg.
Albright told his story in an interview Wednesday with The Atlanta Journal-Constitution.
Albright, who lives in Michigan, said the company hounded his son for payments when he had returned home after his military service and only had part-time work.
“They basically harassed us for a year and a half,” he said.
The company eventually repossessed the car.
But after its first settlement with the consumer agency, Albright said his son got a letter saying he would get a “credit” from the company on his account, which was already closed. That’s what prompted him to call the consumer agency.
He said he was pleased with the settlement.
“We need more help from the government like this,” said Albright. “I think this is a great service to the citizens.
As for the lender, Albright said, “I would consider them loan sharks myself.”
In its statement, Security National said the company is "proud of its work over the past 30 years for its customers, many of whom would not have had access to the credit they and their families need."