SMART Payment Plan LLC settles with Bureau over misleading statements

The Consumer Financial Protection Bureau issued a consent order to SMART Payment Plan, LLC (SMART), after reviewing certain acts and practices regarding its marketing for a Payment Accelerator Program (the SMART Plan) and finding violations of the Consumer Financial Protection Act. The Bureau found that SMART falsely claimed in its individualized benefits disclosures that the SMART Plan would cause consumers to save money on their auto loans. By failing to disclose that its fees would ordinarily exceed the interest savings, Respondent created the misleading impression that consumers would save money using its product. Instead, most of Respondent’s consumers lost money by paying more in fees to participate than the SMART Plan delivered in interest savings.

From January 1, 2012, to March 15, 2015, SMART marketed the SMART Plan as a program that purports to allow consumers to pay off loans faster and more cheaply by making automatic partial payments that match their paydays with bi-weekly payments instead of monthly payments. Because there are 52 weeks in a year, consumers enrolled in the bi-weekly program made 26 half payments to SMART each year, resulting in the equivalent of making 13 monthly payments or one full extra payment to Respondent each year.

Smart held the consumers’ extra payments and used the first extra payment or payments to pay itself all or part of a membership fee. During the Relevant Period that fee was $399. Additionally, during the Relevant Period, SMART charged consumers a $1.95 per bi-weekly debit fee. SMART markets the SMART Plan to consumers almost exclusively through automobile dealers.

During the Relevant Period, SMART enrolled over 180,000 consumers into the SMART Plan. Tens of thousands of these consumers paid the full enrollment fee on an interest-bearing loan. None of SMART’s disclosures informed consumers of the total cost or net cost of the SMART Plan even though the same software that calculated its other representations was capable of calculating individual consumers’ costs. SMART marketed the SMART Plan as a financial benefit to consumers, however, SMART was aware that during the Relevant Period the vast majority of its consumers ended up paying more in total on their loans by enrolling in the SMART Plan.

SMART was ordered to pay equitable monetary relief (consumer redress) of $7,500,000, but that requirement was suspended due to SMART's inability to pay it, and replaced with an order to pay $1.5 million toward the judgment and a civil money penalty of $1.