WASHINGTON – The Consumer Financial Protection Bureau has charged the auto dealer-finance company Herbies Auto Sales up to $800,000 for using allegedly misleading and abusive loan advertising.
Colorado-based Herbies, a buy-here, pay-here dealer which sells and originates loans, was cited Thursday by the CFPB for hiding extra fees when advertising low rates to consumers. The company has agreed to pay $700,000 in restitution to affected borrowers and an additional $100,000 civil penalty if the restitution is not fully paid, without admitting or denying the allegations.
"Buying a car is often one of the most important purchases a consumer makes, so the experience needs to be fair and above-board," said CFPB Director Richard Cordray in a press release. "But concealing finance charges and the real cost of credit, as Herbies did here, is unlawful and unacceptable."
Herbies, also known as Y King S Corp., was accused of misleading consumers by advertising a 9.99% annual percentage rate but not disclosing additional charges such as a required repair warranty of $1,650 and $100 for a GPS payment reminder device. The CFPB also said Herbies would negotiate with cash customers but not with credit customers.
"Herbies' financing scheme lured consumers with misleading advertising and then kept them in the dark about the true cost of financing the cars they were buying," the CFPB said. "This took advantage of consumers' inability to protect their interests in selecting or using Herbies' financing, among other things."
The company has been ordered to clearly disclose all costs and charges for financing the car and get a signed acknowledgment from the consumer by the time financing is offered.