In October 2020, the Consumer Financial Protection Bureau (CFPB) ordered Nissan Motor Acceptance Corp. (NMAC), the auto financing subsidiary of Nissan’s North America division, to pay $4 million in fines and refund its customers a total of $1 million, due to numerous violations against the Consumer Financial Protection Act’s (CFPA) prohibition against unfair, deceptive and abusive acts and practices (UDAAP).
NMAC accepted payments over the phone via a third party payment processor, which charged consumers a $5 fee for electronic checks or in-network debit cards, and a $12.95 fee for credit card or out-of-network debit cards. Consumers who chose to pay by credit card/ out-of-network debit cards, however, were not informed of the alternative payment options available to them, resulting in customers paying significantly more than if they had known of the difference in fees and subsequently selected the lower-fee option.
NMAC was deemed responsible for the third-party payment processor’s neglect of compliance requirements and was consequently ordered to refund $1 million of customers’ fees, highlighting how crucial it is to select payment service providers and software partners that fully abide by compliance requirements, including card brand rules.
Payscout has always maintained that a violation of card brand rules could potentially result in a UDAAP claim under FDCPA or an action brought by the CFPB. The specific violations in this case were:
- The varying fees, when the rule clearly states that all payment types taken via a common channel, must carry the same fee.
- Failure to provide the appropriate disclosures, including the availability of a free option, and obtain consent from the consumer for the convenience fee.
Currently, many payment service providers in the ARM industry are offering solutions that are not fully compliant, resulting in the risk of lawsuits, significant fines, and the potential of your business being completely shut down.
At Payscout, we care deeply about compliance, and as a result all our solutions are designed with compliance in mind, to ensure that we keep you fully protected at all times, including compliance with the card brand rules. To make sure your solution is fully compliant, contact us at firstname.lastname@example.org.