Herbies Auto Sales Must Pay $700,000 in Restitution for Illegal Business Practices

Herbies Auto Sales Must Pay $700,000 in Restitution for Illegal Business Practices
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January 25, 2016

A Colorado-based car dealership will be paying $700,000 in restitution for deceptive and illegal business practices.

The Consumer Financial Protection Bureau (CFPB) accused Herbies Auto Sales, a "buy-here pay-here" used car dealer, of using abusive financing schemes, hiding auto finance charges, and misleading consumers.

Herbies Auto Sales both sells and originates auto loans without selling that loan to a third party, like a bank or credit union. Between 2012 through 2014, the company offered financing to about 1,000 people annually.

The CFPB says that the company advertised a 9.99 percent annual percentage rate, but failed to disclose hidden finance charges that included $1.650 for a required repair warranty and $100 for a required GPS payment reminder service.

The company also hid finance charges that stemmed from a refusal to negotiate car prices. The company refused to negotiate prices with credit customers, but did negotiate with cash customers. The resulting finance charge should have been included in the disclosed cost of credit.

Along with paying $700,000 in customer restitution, Herbies Auto Sales also received a suspended civil penalty of $100,000. Going forward, the auto dealer must post the purchase price on all cars for sale when offering auto financing and provide consumers with information about the financing offer, including the actual APR, price, and all finance charges.

Click here to see the full text of the CFPB's consent order.