CFPB Sues Payday Lender for Allegedly Concealing Free Repayment Plans and Withdrawing Borrowers’ Funds Without Authorization | Hudson Cook, LLP

STRONG POINTS:

  • The CFPB has announced it is taking legal action against a payday lender for allegedly concealing free repayment plans and making unauthorized debit card withdrawals.
  • With its allegations of unfair, deceptive, and abusive acts or practices, it appears that the Bureau is seeking to reinforce and support certain state laws that provide free reimbursement plans in certain cases.
  • In the CFPB press release accompanying the announcement, Director Chopra announced that this lawsuit is another example of the CFPB’s focus on repeat offenders.

CASE SUMMARY:

The complaint, filed in the U.S. District Court for the Northern District of Texas, alleges that the company engaged in unfair, deceptive, and abusive acts or practices by concealing the option of a free refund option plan from consumers who indicated that they could not repay their loan. According to the complaint, this generated at least $240 million in reborrowing fees and kept consumers in cycles of unaffordable debt. The CFPB also alleges that the company made at least 3,000 unauthorized debit card withdrawals, resulting in at least $1.3 million being debited from more than 3,000 borrowers. In 2014, the company entered into a consent order with the CFPB for allegedly using illegal debt collection tactics to pressure delinquent borrowers into borrowing again. In the CFPB press release, Director Chopra said, “Today’s trial is another example of the CFPB’s emphasis on holding repeat offenders accountable.”

The CFPB lawsuit says that in ten states borrowers are contractually entitled to one free repayment plan per year, but the CFPB alleges the company instead pressured borrowers to refinance instead of repayment plans. free refunds. The lawsuit comes just months after the CFPB released a report on no-cost extended repayment plans, which the Bureau says must be offered to borrowers in the majority of states that do not ban payday loans. In the report, Director Chopra said CFPB research suggests no-fee extended repayment plans aren’t working as intended. The complaint seeks monetary redress for consumers, restitution or compensation for unfair gains, injunctive relief, and civil monetary penalties. The complaint is not a final finding or decision that the company broke the law.

RESOURCES:

You can view all relevant court documents and press releases on the CFPB application page.

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