Fintech
CFPB files lawsuit against FinTech company for its alleged deceptive practices and misrepresenting the costs of its loans. | Hudson Cook, LLP
HIGHLIGHTS:
- Just one day after Supreme Court decision In Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd., the Consumer Financial Protection Bureau (“CFPB”) announced that it has filed a lawsuit against a financial technology company that facilitates short-term, small-dollar transactions and without interest. term loans for allegedly misrepresenting the costs of the loans, illegally charging certain “tip” and “donation” fees, and engaging in unfair and deceptive practices when handling and collecting the loans.
- The CFPB’s complaint seeks the following relief: a permanent injunction against the company from committing future violations of the Consumer Financial Protection Act (CFPA) and the Fair Credit Reporting Act (FCRA); monetary relief, including restitution; and a civil monetary penalty.
- According to the CFPB, the company has been the subject of state investigations across the country, many of which have resulted in similar allegations.
CASE SUMMARY:
On May 17, 2024, the CFPB filed a lawsuit in the U.S. District Court for the Central District of California against a financial technology company for violations of the CFPA and the FCRA. Specifically, the CFPB alleges that the company almost requires consumers to pay fees defined as “tips” or “donations” that result in a high cost of borrowing that is not adequately disclosed or avoidable. The CFPB alleges that the company engaged in deceptive practices when it misrepresented certain terms related to the total cost of credit in its loan disclosure documents. Additionally, the CFPB alleges that the company engaged in unfair and deceptive practices when it serviced and collected zero or bad loans because the loans were made without required state licenses or in excess of state usury limits. Finally, the CFPB alleges that the company forced payments by threatening to provide negative credit information to credit reporting bureaus, even though the company did not actually engage in credit reporting.
The complaint seeks damages in the form of a permanent injunction against the company; monetary relief including restitution; disgorgement; and a civil penalty.
RESOURCES:
You can view all relevant court documents and press releases on the site CFPB enforcement page.