The CFPB recently settled an enforcement action with two individuals and the 20 interrelated corporate entities they controlled for the alleged unlawful origination and servicing of short-term, small-dollar online loans.
The CFPB filed the case in the U.S. District Court for the Western District of Missouri, alleging violations of the CFPA, TILA and its implementing Regulation Z, and the EFTA. The defendants were accused of accessing consumers’ bank accounts without authorization, depositing loans into the accounts, and then charging financing charges indefinitely. The CFPB also alleged that many consumers were not given loan agreements and were not aware of the account activity until the loans were deposited and the finance charges were withdrawn. It was further alleged that when consumers did receive loan documents, the disclosures misrepresented the price terms and repayment obligations.
Under the consent order entered by the court, “the defendants will be banned from the industry, forfeit approximately $14 million in assets, and pay a $1 civil money penalty.” The order also imposed a judgment of $69 million for consumer redress, but due to the defendants’ limited ability to pay, the judgment was suspended.
The CFPB press release can be found here.