CFPB reaches $40.6 million deal with lender to cease operations | Goodwin
On December 21, 2021, the Consumer Financial Protection Bureau (CFPB) announced that it had reached an agreement with a California-based fintech company that would require the company to stop “(1) making new loans; (2) recovery of outstanding loans to aggrieved consumers; (3) sell information to consumers; and (4) make false statements in making loans or collecting debts or assisting others who do so. If seized by court, the stipulated final judgment and order will require the company to pay $40,500,000 to the CFPB for the purposes of providing consumer remedy, and a civil penalty of $100,000 to the CFPB.
The agreement would resolve a September 2021 lawsuit filed by the CFPB in the U.S. District Court for the Northern District of California alleging the lender violated the Financial Consumer Protection Act of 2010, 12 USC §§ 5531(a) , 5536(a)(1)(A) (CFPA), the Equal Credit Opportunity Act (ECOA), 15 USC §§ 1691–1691f, and Regulation B, 12 CFR § 1002.9(a)–(b). The CFPB complaint also alleged that the company violated a 2016 CFPB order by pursuing illegal and deceptive business practices, misleading consumers about the benefits of repeat borrowing, and failing to provide notices required by lending laws. fair.
According to the CFPB, the lender – which was backed by prominent venture capitalists – was offering consumers online one-time, installment loans that it marketed as an alternative to payday loans. The CFPB alleged that the lender marketed a free tuition program and told consumers that after completing the tuition, they would be eligible for lower interest rates and larger loan amounts on any future loans. . However, according to the CFPB, despite the end of the courses, consumers were not eligible for larger loans and were offered similar or less favorable interest rates.