The CFPB filed a complaint in the United States District Court for the District of Massachusetts against a debt collector alleged to have engaged in unfair, deceptive and abusive acts or practices in violation of the Consumer Financial Protection Act. According to the CFPB, the debt collector collected debts in which it had no legal right to collect on. In particular, the CFPB alleged that the debt collector entered into an arrangement with an online lender to service loans, which the CFPB characterized as similar to payday lending, made by the lender. The debt collector and its subsidiary also purchased the consumer-installment loans. After the online lender shut down its operations, the debt collector allegedly continued to collect monthly installment payments from consumers. The CFPB alleged that because the loans made by the online lender violated state usury and licensing laws, and because the debt collector’s subsidiary lacked a license to acquire debts, it had no legal right to collect the debts from consumers. The CFPB also claimed that the debt collector failed to disclose that the loans were void or not subject to a repayment obligation under state law and by taking the full balance from consumers of loans the CFPB considered void and uncollectable, the debt collector took unreasonable advantage of consumers’ lack of understanding about the impact of applicable state law on a party’s rights and obligations regarding the loan, in violation of the CFPA’s prohibition on abusive acts and practices. The CFPB is seeking to permanently enjoin the debt collector from continuing its operations and is asking the court to award restitution for all interest, fees and principal collected from consumers, award civil money penalties and order disgorgement of “ill-gotten gains.” Although done indirectly, this is the first complaint by the CFPB against an online payday lender.

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