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CFPB: BHPH Dealer to Pay $800,000 for Abusive Financing Practices

The Consumer Financial Protection Bureau has taken action against Herbies Auto Sales for abusive financing schemes, hiding auto finance charges and misleading consumers. The buy-here, pay-here operation was ordered to pay $700,000 in restitution and a civil penalty of $100,000.

by Staff
January 21, 2016
2 min to read


WASHINGTON, D.C. — The Consumer Financial Protection Bureau has taken action against Herbies Auto Sales for abusive financing schemes, hiding auto finance charges and misleading consumers. The buy-here, pay-here dealership will be required to pay $700,000 in restitution and a civil penalty of $100,000.

Herbies will also be required to cease their deceptive practices and properly represent interest rates, finance charges, amounts financed, and any fact material concerning financing of a motor vehicle. Additionally, the dealership will need to clearly and prominently post the purchase price on all vehicles for sale when its offering auto financing, and must give the actual APR and price of the car. Customers will then need to sign an acknowledgement confirming they received all the required information before or at the time of receiving a financing offer.

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“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. “But concealing finance charges and the real cost of credit, as Herbies did here, is unlawful and unacceptable.”

Y King S Corp, which does business as Herbies Auto Sales in Greeley, Colo., operates as a dealer that sells both the car and originates the auto loan without selling that loan to a third party. From 2012 through May 2014, the dealer offered financing to about 1,000 customers.

Herbies unlawfully advertised a misleadingly 9.99% APR without disclosing the required repair agreement, the payment assurance device equipping the vehicles and other credit costs as finance charges. This helped the company convince consumers that they would get the 9.99% APR, while in reality they were getting a much higher rate.

The company hid $1,650 for a required repair agreement and $100 for a required GPS payment reminder device in the finance charges. It refused to negotiate prices with credit customers but accepted negotiations with cash customers.

According to the CFPB, these abusive practices that lured consumers and kept them in the dark about the true cost of the financing their vehicle were in violation of the Truth in Lending Act and the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act.

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