CFPB Enters Consent Order with Lead Aggregator For Steering Consumers to Illegal Loans

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On September 6, 2017, the Consumer Financial Protection Bureau (CFPB) announced that it had entered into a consent order with a lead aggregator over claims the aggregator steered consumers towards lenders who offered installment or payday loans that were illegal in consumers’ states.  The consent order claimed that the aggregator sold loan applications to lenders who had no legal right to collect on those loans in some consumers’ states.  The CFPB alleged that the sale of these loans violated Section 1031(d) and 1036(a)(1)(B) of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(d)(2)(A), 5536(a)(1)(B), as the manner in which the loans were sold prevented consumers from understanding the risks, costs, or conditions of the loans they were offered.  The CFPB further alleged that the aggregator “knows or has reason to believe that the Leads it sells are likely to result in loans with interest rates that exceed state usury limits or otherwise fails to comply with laws of the state where the consumer is located.”

As part of the consent order, the aggregator agreed to undertake reasonable efforts to ensure the loan applications it sells do not result in loans that are void.  The aggregator also agreed to pay a civil penalty of $100,000.

Separately, the CFPB sued the aggregator’s president over the same activity.  The CFPB filed a proposed settlement and consent order (which has not yet been entered by the court) which would require the aggregator’s president to pay $250,000, and to ensure that the lead aggregator does not deceive consumers and does not sell applications that result in void loans.  The president had previously been sued by the CFPB while he was president of a different lead aggregator, stemming from similar allegations of misconduct.

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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