CFPB Enforcement Uses UDAAP to Put Focus on State Law Compliance


The Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) has put state law compliance front and center in a case filed in federal court against an online payday lender, related companies, and their principal for allegedly collecting on money they did not owe. According to the CFPB, the companies funded, purchased, serviced and collected online payday loans made by a tribally-affiliated lender (not sued by the CFPB). The defendants were charged with engaging in unfair, deceptive and abusive acts and practices (“UDAAP”) in seeking to collect loans that were purportedly void in whole or in part under state law. The CFPB does not have authority to enforce state usury rates or establish its own standard, so this approach has become one of the few ways that the CFPB can go after online small-dollar or payday lenders.

The CFPB seeks:

- Monetary relief, damages, and civil penalties: The CFPB wants the lender to refund consumers the money that they took from them where the loans were void or the consumer’s obligation was otherwise nullified. The Bureau’s complaint also seeks additional damages and civil penalties.

- No further violations of federal consumer laws: The Bureau wants the defendants to adhere to all federal consumer financial protection laws, including prohibitions on UDAAPs.

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