Westlake Financial Lawsuit: CFPB, DOJ, and Class Action Cases

Westlake Financial Services, one of the country’s largest subprime auto lenders, has been sued and sanctioned repeatedly over the past decade. The active matter in 2026 is a $1.2 million class action settlement over convenience fees charged to California borrowers, but the broader Westlake Financial lawsuit history includes a $44.1 million Consumer Financial Protection Bureau enforcement order, two Department of Justice actions for violating military servicemembers’ rights, a Massachusetts Attorney General settlement over excessive interest rates, a 2025 Illinois appellate ruling that let class counterclaims proceed in court, and an ERISA settlement brought by a former employee.

Klare v. Westlake: The $1.2 Million Convenience Fee Settlement

The current case most borrowers are looking for is Klare v. Westlake Services, LLC, filed in the U.S. District Court for the Central District of California (Case No. 2:23-cv-06386-FMO).¹ Plaintiff Michael Klare alleged Westlake violated California debt collection and unfair competition laws by charging borrowers “convenience fees,” sometimes called “pay-to-pay fees,” when they paid through a third-party processor, ACI Payments, Inc.² The complaint said those fees, stacked on top of what borrowers already owed, were not allowed under state law.³

The parties agreed to a $1.2 million settlement fund. Westlake did not admit wrongdoing.² The class covers anyone with a retail installment contract assigned to Westlake who paid a convenience fee to ACI Payments between June 20, 2022, and August 18, 2025.⁴ Class members were identified through Westlake’s own records and can take either a cash payment or, if they still carry a balance, an account credit. The per-person amount depends on how many valid claims come in; the net fund, after fees, administrative costs, and any incentive award, is divided per capita.³

Judge Fernando M. Olguin granted preliminary approval on November 3, 2025.¹ Final approval was set for April 16, 2026. The deadline to object or opt out was February 3, 2026, and the claims deadline was extended to July 8, 2026.⁴

The CFPB’s $44.1 Million Enforcement Order

The largest regulatory action against Westlake came from the Consumer Financial Protection Bureau. On September 30, 2015, the CFPB issued a consent order against Westlake Services, LLC and its subsidiary Wilshire Consumer Credit, LLC for what the agency described as illegal debt collection tactics and deceptive lending.⁵

The investigation covered conduct from January 2010 through at least April 2014 and affected more than 137,000 loan accounts. The agency found violations of the Fair Debt Collection Practices Act, the Truth in Lending Act, and the Dodd-Frank Act.⁵ Among the specific findings:

Collectors used a web-based service called “Skip Tracy” to disguise their caller IDs, impersonating repossession companies, pizza delivery services, flower shops, and even borrowers’ friends and family.
Collectors falsely told borrowers they were under investigation or facing criminal prosecution.
Collectors disclosed borrowers’ debt information to employers, family, and friends.
The companies changed due dates and extended loan terms without permission, letting extra interest accrue while describing the changes as favors to the borrower.
Wilshire quoted monthly rates on auto title loans without properly disclosing annual percentage rates.

The CFPB ordered $44.1 million in consumer relief, split into $25.8 million in cash payments and the rest in balance reductions, plus a $4.25 million civil penalty.⁵ The order also banned continued use of the deceptive tactics.⁶

DOJ Actions Over Servicemember Protections

The Department of Justice has gone after Westlake twice for violating the Servicemembers Civil Relief Act (SCRA), the federal law that provides financial protections to active-duty military members.

2017: Illegal Vehicle Repossessions

In September 2017, the DOJ alleged in the Central District of California that Westlake and Wilshire Consumer Capital had illegally repossessed 70 vehicles owned by SCRA-protected servicemembers between 2011 and 2016, without the court orders federal law requires.⁷ The case grew out of a 2016 referral by the CFPB’s Office of Servicemember Affairs. Westlake settled for roughly $761,000, which included $10,000 per affected servicemember, compensation for lost equity, credit repair, and a $60,788 civil penalty paid to the United States.⁸ The company also had to verify military status before any future repossessions.

2022: Interest Rate Benefit Violations

The 2017 agreement put Westlake under ongoing DOJ monitoring, and that monitoring turned up more problems. In September 2022, the DOJ reached an amended settlement after finding that Westlake had failed to give qualifying servicemembers the full interest rate benefits SCRA requires. The law caps interest at 6 percent for qualifying servicemembers, and Westlake was not applying that cap retroactively to the date military orders were issued. It also delayed approving many benefit requests.⁹ Westlake paid $185,460 to 250 affected servicemembers plus a $40,000 civil penalty. Those denied retroactive benefits received refunds of excess interest plus three times the overpayment or $100, whichever was greater. Those whose approvals were delayed more than 60 days received $500 each.⁸

Massachusetts Attorney General Settlement

In March 2016, the Massachusetts Attorney General’s Office settled with Westlake over allegations of excessive interest rates on subprime auto loans in the state. The AG said Westlake bought loans from dealers that included “GAP coverage” fees, an insurance add-on that, once folded into the financed amount, pushed the effective interest rates above the state’s 21 percent cap.¹⁰

Westlake agreed to about $5.7 million in relief for more than 2,000 Massachusetts consumers, an average of roughly $3,000 per borrower. The company had to eliminate interest on the affected loans, forgive any outstanding interest, and refund interest borrowers had already paid. The agreement was filed as an assurance of discontinuance in Suffolk Superior Court and was part of a broader $7.4 million action that also swept in American Credit Acceptance.¹⁰

Illinois Appellate Ruling: Westlake v. Williams

A 2025 Illinois appellate decision added another dimension to Westlake’s exposure. In Westlake Services LLC v. Erica Williams, 2025 IL App (1st) 241383, Westlake sued Williams in Cook County in November 2022 to collect roughly $10,651 remaining after repossessing and selling her 2013 Hyundai Sonata. Williams filed class action counterclaims alleging that Westlake violated Illinois consumer statutes, including the Motor Vehicle Retail Installment Sales Act and the Consumer Fraud and Deceptive Business Practices Act, through its handling of pay-to-pay fees and payment allocations.¹¹

Westlake then tried to push those counterclaims into private arbitration under a clause in the original loan contract. It had not mentioned arbitration when filing its own suit, had not produced the arbitration agreement for 11 months, and only raised the issue after Williams filed her counterclaims. The Appellate Court of Illinois held that Westlake had waived arbitration by litigating in a way inconsistent with an intent to arbitrate. The court also held that the class action waiver in the arbitration clause applied only to arbitration proceedings, not to court litigation, because the waiver was “inexorably intertwined” with the arbitration agreement itself.¹² The ruling issued July 25, 2025, with rehearing denied on August 21, 2025, sending Williams’ class counterclaims back to circuit court and opening a path for other Illinois borrowers to bring similar fee claims.¹¹

Nguyen v. Westlake: The ESOP Lawsuit

Not every Westlake lawsuit is about borrowers. In Mary Nguyen v. Westlake Services Holding Company (Case No. 8:23-cv-00854, C.D. Cal.), filed in May 2023, a former employee alleged that Westlake violated the Employee Retirement Income Security Act by mismanaging its Employee Stock Ownership Plan. The core claim was that the company authorized a “special valuation” of company stock as of March 31, 2020, that reduced the value of departing employees’ accounts.¹³

The class included plan participants who left Westlake between January 2019 and March 2020 and had account balances above $5,000. The parties reached a $1.25 million settlement. Class counsel from Miller Shah LLP could receive up to one-third of the fund; Nguyen was eligible for up to $17,500 as a service award, subject to court approval. Remaining funds were distributed as restorative payments, with class members able to roll payments into a tax-qualified account or take a direct check.¹³ The case was terminated on January 27, 2025.¹⁴

Who Westlake Is

Westlake Financial Services is a privately held, Los Angeles-based auto finance company founded in 1978 by Don Hankey. It buys and services subprime, near-prime, and prime auto retail installment contracts in all 50 states. It is wholly owned by Nowlake Technology, LLC, the largest company within the Hankey Group. As of early 2024, its serviced portfolio exceeded $17.2 billion, with total assets of $22.4 billion.¹⁵ The Better Business Bureau, where Westlake is not accredited, listed 2,273 complaints in the three years through mid-2026, most centered on billing disputes, credit reporting, customer service, and payment allocation.¹⁶

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PACER Monitor. Michael Klare v. Westlake Services LLC Et Al
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Top Class Actions. $1.2M Westlake Financial Services Illegal Fees Class Action Settlement
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Klare Fee Settlement. Frequently Asked Questions
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Klare Fee Settlement. Klare Fee Settlement Homepage
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Consumer Financial Protection Bureau. CFPB Orders Indirect Auto Finance Company to Provide Consumers $44.1 Million in Relief for Illegal Debt Collection Tactics
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Consumer Financial Protection Bureau. Westlake Services LLC d/b/a Westlake Financial Services LLC
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U.S. Department of Justice. Justice Department Obtains $700,000 for Servicemembers to Resolve Allegations Against Westlake Services and Its Subsidiary
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U.S. Department of Justice. United States v. Westlake Services LLC (C.D. Cal.)
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U.S. Department of Justice. Westlake Financial to Pay Over $225,000 to Resolve Servicemembers Civil Relief Act Claims
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Commonwealth of Massachusetts. Thousands of Massachusetts Drivers to Receive $7.4 Million in Relief on High-Interest Auto Loans From Two Lenders
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Illinois Courts. Westlake Services LLC v. Williams, 2025 IL App (1st) 241383
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FindLaw. Westlake Services LLC v. Williams
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Strategic Claims. Westlake ESOP Settlement Notice
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CourtListener. Mary Nguyen v. Westlake Services Holding Company
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Stephens Inc. Westlake Services LLC
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Better Business Bureau. Westlake Financial Services Complaints