CFPB Files Lawsuit Against My Loan Doctor And Its Founder For Alleged Deceptive Marketing Of Deposit Accounts

Ballard Spahr LLP

Ballard Spahr LLP

The CFPB filed a complaint on July 6, 2020 in a New York federal district court against My Loan Doctor LLC (“Loan Doctor”) and its founder, Dr. Edgar Radjabli, for allegedly making false, misleading, and inaccurate marketing representations in violation of the Consumer Financial Protection Act’s prohibition against unfair, deceptive or abusive acts or practices.

The Bureau alleges that the defendants engaged in deceptive acts or practices in connection with offering consumers Healthcare Finance Savings CD Accounts and High Yield CD Accounts. The complaint asserts that Loan Doctor falsely represented that it would use consumers’ deposits to originate loans to healthcare professionals and that it lined up investors in advance to purchase the loans that Loan Doctor originated. The Bureau claims that Loan Doctor did not use deposits to originate loans and did not enter into contracts with investors to purchase such loans.

The complaint also asserts that Loan Doctor made false representations as to the safety of consumers’ deposits. The Bureau contends that Loan Doctor falsely represented itself to be a commercial bank and that the safety of consumers’ deposits was comparable to the safety of a savings account. The complaint alleges that while Loan Doctor claimed that deposits that were not being used to originate loans would be held in insured accounts, deposited at U.S. banks or Lloyd’s of London, and fully collateralized with cash or cash alternatives, most deposits were actually placed in a hedge fund owned by Dr. Radjabli and invested in volatile securities or securities-backed investments.

Finally, the complaint asserts that Loan Doctor falsely represented that its High Yield CD Accounts paid interest at rates between 5-6.25% for years prior to 2019. The Bureau contends this statement was false because Loan Doctor did not accept consumer deposits until August 2019.

The Bureau’s complaint seeks an injunction against the defendants, as well as damages, consumer redress, disgorgement, and civil money penalties.

In addition to the alleged violations asserted by the CFPB against the defendants under the Consumer Financial Protection Act, we are surprised that the Securities and Exchange Commission has not joined in the complaint to assert claims for selling unregistered securities under the Securities Act of 1933, as amended, and for selling securities without a broker-dealer registered under the Securities Exchange Act of 1934, as amended.

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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