Consumer Portfolio Services Lawsuit: FTC Settlement and Class Actions

The Consumer Portfolio Services lawsuit history is anchored by a 2014 Federal Trade Commission enforcement action that cost the subprime auto lender more than $5.5 million, and it extends through class actions over illegal repossessions, an employee misclassification case, and a steady flow of individual consumer complaints. Many borrower claims never reach a courtroom because CPS enforces mandatory arbitration clauses with class action waivers.

Who CPS Is

Consumer Portfolio Services, Inc. buys and services retail auto installment contracts written through car dealerships, focusing on subprime borrowers with limited or troubled credit histories.¹ Its loans typically carry interest rates of about 18% to 21%.² The company is headquartered in Las Vegas with primary operations in Irvine, California, and its managed portfolio stood at roughly $3.67 billion at the end of 2024.

The 2014 FTC Case and $5.5 Million Settlement

The most detailed public account of CPS’s practices comes from a complaint the Department of Justice filed on behalf of the FTC in the U.S. District Court for the Central District of California. The government alleged violations of the FTC Act, the Fair Debt Collection Practices Act, and the Fair Credit Reporting Act.³

What the Government Said CPS Did

The FTC’s allegations fell into three groups. CPS misrepresented what consumers owed, imposing fees the loan contracts did not permit and unilaterally raising principal balances due to what the FTC called “human error, inadequate quality control, or faulty computer programming.” Because interest was calculated daily on principal, those errors compounded. When borrowers questioned their balances, CPS falsely claimed it had audited the accounts and confirmed the numbers.⁴

Collectors, according to the FTC, harassed consumers and violated their privacy. They called friends, family, employers, and coworkers to disclose debts even when CPS already knew where the borrower lived. They called people at work after being told to stop, used profanity, falsely threatened immediate repossession, manipulated Caller ID to display local area codes, and made unauthorized debits from consumers’ bank accounts.⁵

Finally, the FTC said CPS lacked reasonable written procedures to ensure the accuracy of credit-bureau reporting and did not properly investigate consumer disputes, as the Furnisher Rule under the FCRA requires. Borrowers who defaulted then faced deficiency judgments calculated from the inflated account information.⁴

What the Settlement Required

CPS settled in May 2014 without admitting or denying the allegations. The package totaled more than $5.5 million: over $3.5 million in refunds and account adjustments for roughly 128,000 consumers, debt forbearance on another 35,000 accounts, and $2 million in civil penalties.⁵ Refunds and balance reductions covered consumers overcharged on accounts serviced between January 2008 and June 2013.⁶

The consent order permanently barred the conduct described in the complaint and required CPS to build a data integrity program, submit to independent third-party assessments every two years for a decade, obtain written informed consent before modifying loan terms, and follow strict rules on third-party contacts.⁶ Importantly, the consent order does not give individual consumers a private right of action to sue CPS directly for violating it.⁷

Class Actions Over Repossessions

Bernal v. CPS (Wisconsin, 2018)

A Wisconsin couple filed a proposed class action in June 2018 in the U.S. District Court for the Eastern District of Wisconsin after their 2004 Kia Sorento was taken in the middle of the night. The suit named CPS and its repossession contractor, Statewide Recovery Specialists, and alleged violations of the FDCPA and the Wisconsin Consumer Act for seizing the vehicle without following the state’s multi-step notice procedure or getting a court-ordered judgment of replevin.⁸ The plaintiffs said the last communication they received from CPS was a November 2017 billing statement showing about $943 past due on a $9,434 principal balance.⁹ The available record does not show a final outcome.

Holloman v. CPS (Maryland, 2022)

Teaonna Holloman filed a class action in Maryland state court in December 2022 after CPS repossessed her vehicle in December 2020 and then sued her for a deficiency of more than $16,000. She alleged that CPS’s post-repossession notices failed to comply with Maryland’s Credit Grantor Closed End Credit Provisions, which if true would bar the company from collecting a deficiency at all. The proposed class covered Maryland consumers whose vehicles CPS repossessed and sold in the prior four years and whom CPS then sued for deficiencies after sending deficient notices.¹⁰

Holloman’s case never reached the merits. CPS removed it to federal court and moved to compel individual arbitration under a clause in the installment contract that required binding arbitration and barred class-wide proceedings. The contract also stated that filing a deficiency collection suit did not waive CPS’s right to compel arbitration on other claims. The court granted the motion and stayed the case.¹⁰

Why Many Borrower Suits Never Get to a Jury

Holloman is not an outlier. CPS auto loan contracts include mandatory arbitration clauses with class action waivers, and federal courts have repeatedly enforced them. In the 2025 case Knox v. Consumer Portfolio Services, a Maryland borrower alleging predatory lending and a 21.99% interest rate tried to challenge CPS in federal court after a state court had already ordered arbitration and then dismissed the case when the borrower failed to initiate it. The federal court held it lacked jurisdiction to review the state court’s arbitration order under the Rooker-Feldman doctrine, and it added that the 2014 FTC consent order gave the borrower no private right of action against CPS.⁷

The effect on borrowers is practical. Class actions that could aggregate small individual claims into viable litigation are shut down, and consumers must pursue arbitration alone.

Lawson v. CPS: Employee Misclassification

Not every suit against CPS comes from borrowers. In September 2018, current and former employees filed a class action in Orange County, California, Superior Court alleging that CPS misclassified marketing representatives, field sales representatives, and regional sales managers as exempt from California overtime laws, resulting in unpaid overtime and other labor violations. A $1.1 million class settlement received preliminary approval in January 2024, with a final approval hearing set for May 2024.¹¹

Complaints Have Continued After the Settlement

The compliance reforms mandated in 2014 have not ended the flow of consumer complaints. The company’s Better Business Bureau profile shows 264 complaints over the most recent three-year period, 206 of them classified as billing issues and 36 as service or repair issues.¹²

The themes echo the FTC case. Borrowers report excessive phone calls, including to relatives and workplace contacts. They allege credit reporting errors, such as accounts appearing simultaneously as charged-off and paid-off, or unauthorized hard inquiries. Disputes over late fees, returned-payment charges, and payoff amounts are common, and some consumers have challenged repossessions that took place while they believed they were current on payments.¹²

1
SEC. Consumer Portfolio Services 10-K Filing, December 31, 2024
2
Los Angeles Times. Stock Spotlight: Consumer Portfolio Services
3
FTC. Consumer Portfolio Services, Inc. Case Page
4
FTC. FTC Auto Lending Enforcement Presentation
5
FTC. Auto Lender Will Pay $5.5 Million to Settle FTC Charges
6
Consumer Portfolio Services. Stipulated Order for Permanent Injunction and Civil Penalty Judgment
7
CaseMine. Knox v. Consumer Portfolio Services
8
ClassAction.org. WI Consumers Sue Consumer Portfolio Services, Statewide Recovery Specialists Over Car Repossession
9
ClassAction.org. Bernal et al v. Consumer Portfolio Services Inc et al, Complaint
10
U.S. District Court for the District of Maryland. Memorandum Order, Holloman v. Consumer Portfolio Services
11
DHKL Law. Lawson v. Consumer Portfolio Services
12
BBB. Consumer Portfolio Services, Inc. BBB Complaints