CFPB, State AGs Announce Joint Enforcement Action Against Military Consumer Lender


On July 29, the CFPB and 13 state AGs announced a consent order that requires a consumer lender currently in Chapter 7 bankruptcy to provide $92 million in debt relief for about 17,000 U.S. servicemembers and other consumers harmed by the company’s alleged predatory lending scheme. The lender offered credit to consumers purchasing computers, videogame consoles, televisions, or other products, which typically were purchased at mall kiosks near military bases. In some cases the lender was the initial creditor, and in other cases, the lender provided indirect financing by agreeing to buy the financing contracts from merchants who sold the goods.


The CFPB claims the lender “lured consumers with the promise of no money down and instant financing.” Then, according to the CFPB, the lender and its merchant partners artificially inflated the disclosed price of the consumer goods being sold to mask finance charges collected by the lender. The CFPB also asserts that the company withheld information on billing statements, failed to obtain required lending licenses, and illegally collected on loans that were void pursuant to state licensing and usury laws.

Specifically, the CFPB alleges the lender violated TILA by (i) failing to accurately disclose the finance charge and annual percentage rate for financing agreements where they served as the creditor; and (ii) failing to disclose or accurately disclose in periodic billing statements for open-end financing agreements the annual percentage rate, the balance subject to interest rate, how that balance was determined, itemized interest charges, the closing date of the billing cycle, and the account balance on that date.

In addition, the CFPB claims the lender violated the Consumer Financial Protection Act’s UDAAP provisions by purchasing deceptive financing agreements from merchants and thereby facilitating the merchant’s deceptive disclosures. The CFPB also asserts UDAAP violations for servicing and collecting on consumer financing agreements that state laws rendered void or limited the consumer’s obligation to repay.

Debt Relief

The order requires that all efforts to collect on any outstanding financing agreements cease—approximately $60 million in contracts owed by about 12,000 consumers—and that the liquidating trust created as part of the company’s bankruptcy plan stop collections on approximately $32 million owed by more than 5,000 consumers. Servicemembers may keep the merchandise they purchased. In addition, the company must update credit reporting agencies and notify servicemembers and other consumers of debt status.

Penalty & Redress

The order also requires the company, through its bankruptcy trustee, to make a $1 penalty payment to the CFPB’s Civil Penalty Fund. The CFPB states that the bankruptcy prevents it from assessing a larger penalty, but the $1 payment may allow harmed consumers to be eligible for relief from the Civil Penalty Fund in the future, although that determination has not yet been made. The order also requires redress payments for excess finance charges. Due to the company’s inability to pay, the redress requirement will be suspended once the company complies with the debt relief provisions.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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