Fintechs Beware! The CFPB is Monitoring You Closely

Troutman Pepper

On March 18, Opportunity Financial, Inc. (OppFi) — a Chicago-based platform lender — announced that the Consumer Financial Protection Bureau (CFPB) is investigating its compliance with the Military Lending Act. The announcement — coupled with several others like it in recent months — confirms that the CFPB is closely monitoring fintechs.

OppFi is a consumer lending company that works with banks to facilitate loans to consumers who lack access to traditional credit. In a proxy filing related to its go-public deal with a special-purpose acquisition company (SPAC), OppFi disclosed that the CFPB “has issued a civil investigative demand … as a result of a consumer complaint” and is investigating whether OppFi’s “lending practices violated any consumer financial laws with respect to the Military Lending Act.” OppFi noted that it intends to cooperate with the CFPB in the investigation, but also that it has responded to the CFPB to “refute the number of affected consumers” and explain that the “impacted consumers were already provided with redress.”

The Military Lending Act provides loan protections for active duty servicemembers, their spouses, and certain dependents. Most notably, it caps the interest rate that can be charged to active duty servicemembers, their spouses, and their dependents for most consumer loans at 36%. It also prohibits creditors from requiring arbitration, mandating an allotment to repay the loan, or charging prepayment penalties to covered individuals, amongst other protections.

OppFi’s announcement confirms that the CFPB is closely monitoring fintechs. Indeed, in February 2021, Venmo, a mobile money transfer service, disclosed that the CFPB is investigating its collection practices. And in March 2021, Oportun, another online consumer lender, disclosed that the CFPB is investigating its debt collection practices.

The CFPB’s investigation — which, per OppFi, followed a consumer complaint — demonstrates again that companies subject to the CFPB’s jurisdiction should maintain robust consumer dispute-resolution procedures. It also demonstrates that the CFPB is focused on fintechs.

As we’ve previously noted, the CFPB — under the direction of Acting Director Dave Uejio — is returning to the more aggressive enforcement and rulemaking stance that characterized the agency under the Obama administration. We thus expect to see more announcements from fintechs, like OppFi, demonstrating the CFPB’s renewed vigor.

Troutman Pepper regularly defends companies before the CFPB and also regularly assists clients in building out and maintaining their compliance programs.

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