On May 17, the CFPB
announced a
lawsuit against an online lending platform through which consumers could obtain small-dollar, short-term loans through a brokering arrangement with lenders. The CFPB alleged the platform violated the CFPA through its deceptive advertisements to consumers on the platform’s alleged promotion of financing terms which included “no interest,” “0% APR,” or “0% interest” but instead invited consumers to provide “tips” and “donations” to lenders, which, would increase the likelihood of a loan being funded. The CFPB further alleged that while the platform marketed zero-interest loans, the platform did not provide users an option for a $0 donation fee or to skip the fee altogether. The Bureau claimed, “almost all of [the platform’s] loans carry an equivalent annual percentage rate of over 36% APR, and many loans carry an APR in excess of 300%, with some over 1,000%.” The Bureau also claimed the platform violated the CFPA by providing misleading TILA disclosures that did not contain the cost of the additional fees and tips in the quoted total payments.
The complaint alleged further violations of the CFPA where the platform (i) obscured whether and how borrowers can select the option for no donation or tip; (ii) stated or implied through its practices that consumers were obligated to repay loan amounts although the loans violated the applicable states’ lender-licensing or usury laws that declared such loans void ab initio or limited consumers’ obligation to repay; (iii) requested to collect and collects on void loans consumers were not obligated to repay for the aforementioned reason; (iv) misleadingly implied that it will furnish negative information to the credit bureaus unless the consumer makes a payment, without actually intending to do so; and (v) violated the FCRA.
The CFPB’s complaint stated that because the platform was a consumer reporting agency under the FCRA and therefore would be required to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” The CFPB will seek, among other things, injunctions against the platform to prevent future violations, monetary relief for borrowers, forfeiture of ill-gotten gains, and a civil money penalty.
