The court-appointed receiver for a group of interrelated companies sued by the CFPB in September 2014 for engaging in allegedly unlawful online payday lending activities has filed a malpractice lawsuit against the law firm that assisted in drafting the loan documents used by the companies.

The companies sued by the CFPB included entities that were directly involved in either making payday loans to consumers or providing loan servicing and processing for those loans.  The CFPB alleged that the defendants engaged in deceptive and unfair acts or practices in violation of the Consumer Financial Protection Act as well as violations of the Truth in Lending Act and the Electronic Fund Transfer Act.  According to the CFPB’s complaint, the defendants’ unlawful actions included providing TILA disclosures that did not reflect the automatic renewal feature and conditioning the loans on the consumer’s repayment through preauthorized electronic funds transfers.

According to the receiver’s complaint, the companies’ payday lending was initially done through entities incorporated in Nevis and subsequently done through entities incorporated in New Zealand.  The companies’ loan servicing and processing (including customer service) was done through two entities that were incorporated in Missouri and maintained offices, employees, and mailing addresses in Missouri.

The receiver alleges that the law firm assisted in drafting the loan documents which, on their face, violated the TILA, EFTA and CFPA.  He claims that the law firm committed attorney malpractice and breached its fiduciary obligations to the companies by failing to advise them that because of the U.S. locations of the servicing and processing entities, the loan documents used by the companies had to comply with the TILA and EFTA, and that once the CFPA went into effect, the servicing and processing entities could also be liable for such violations as “covered persons” under the CFPA.