CFPB Orders Payday Lender to Pay Over $500k in Civil Monetary Penalty and Restitution to Customers

On December 16, the CFPB announced that it had entered a stipulation and consent order assessing a $250,000 civil monetary penalty and other remediation against a financial-services company that offers payday loans and check-cashing services based on allegations that it misled consumers through deceptive online advertisements and collections letters and made unauthorized electronic transfers from consumers’ bank accounts. Among other things, the Bureau took particular issue with the fact that Bureau examiners had previously identified “significant compliance-management-system weaknesses that heightened the risk that violations w[ould] occur,” and that “[a]t the times the violations described in this order, the company had not adequately addressed these issues.”

According to the terms of the consent order, the company is required to: (i) end its deceptive practices and obtain authorization for any electronic-fund transfers; (ii) pay approximately $255,000 to redress harm caused to affected consumers; and (iii) pay a civil monetary penalty of $250,000. As explained by CFPB Director Richard Cordray, “consumers were making decisions based on false and deceptive information, and today’s action will give the company’s customers the redress they are owed.”

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CFPB Releases Final Rule on Prepaid Financial Products; Chamber of Digital Commerce Comments on Scope of the Rule

On October 5, the CFPB released its final rule on prepaid financial products, including traditional prepaid cards, mobile wallets, person-to-person payment products, and other electronic accounts with the ability to store funds. The rule is intended to provide consumers with additional federal protections under the Electronic Fund Transfer Act analogous to the protections checking account consumers receive. The following federal protections are included in the new rule: (i) financial institutions will be required to provide certain account information for free via telephone, online, and in writing upon request, unless periodic statements are provided; (ii) financial institutions must work with consumers who find errors on their accounts, including unauthorized or fraudulent charges, timely investigate and resolve these incidents, and restore missing funds when appropriate; and (iii) consumers will be protected against unauthorized transactions, such as withdrawals or purchases, if their prepaid cards are lost or stolen. Read more…

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CFPB Releases Guidance on Financial Exploitation of Older Americans

On March 23, the CFPB simultaneously issued a report and an advisory providing financial institutions with information on the financial exploitation of older Americans and recommendations on how to prevent and respond to such exploitation. The report combines the CFPB’s “expertise regarding elder financial exploitation” with knowledge gained from interviews conducted between May 2014 to March 2016 with various stakeholders, including, but not limited to, representatives of individual banks and credit unions of various sizes, trade associations, technology vendors, and law enforcement. According to the CFPB, the release of recommendations outlined in the report and advisory mark the “first time a federal regulator has provided an extensive set of voluntary best practices to help banks and credit unions fight [financial exploitation of older Americans].” The CFPB recommended that financial institutions (i) establish protocols for ensuring staff compliance with the Electronic Fund Transfer Act; (ii) train staff to detect the warning signs of financial exploitation and respond appropriately to suspicious events; (iii) maintain fraud detection systems that provide analyses of the types of products and account activity associated with elder financial exploitation; (iv) report cases of suspected exploitation, which includes filing Suspicious Activity Reports with FinCEN when necessary; and (v) collaborate with stakeholders, including law enforcement, at the local, regional, and state level.

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FTC Announces Settlements with Online Payday Lenders Over Alleged Violations of TILA and EFTA

On January 5, the FTC announced separate settlements with two online payday lenders to resolve charges dating back to April 2012 that the defendants violated TILA, the Federal Trade Commission Act (FTC Act), and the Electronic Funds Transfer Act (EFTA). According to the FTC, the defendants (i) violated TILA by failing to accurately disclose information regarding the loan terms, such as the finance charge, annual percentage rate, payment schedule, and the total of payments; (ii) violated the FTC Act’s prohibition on deceptive acts or practices by misrepresenting how much loans would cost consumers; and (iii) violated the EFTA by conditioning extension of credit to consumers on the consumers’ repayment by preauthorized debits from their bank accounts. In addition to prohibiting the defendants from engaging in practices that violate the TILA and EFTA, the FTC’s final orders require the defendants to each pay $2.2 million and collectively waive $68 million in uncollected fees to consumers. Combined with other settlements, the FTC has recovered approximately $25.5 million in connection with its case against several payday lending companies and related individuals.

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CFPB Orders Small-Dollar Lender to Pay $10 Million for Debt Collection Practices; Releases Compliance Bulletin

On December 16, the CFPB announced a consent order against a Texas-based small-dollar lender for alleged violations of the Consumer Financial Protection Act, the Electronic Fund Transfer Act (EFTA), and the EFTA’s implementing regulation, Regulation E. According to the CFPB, beginning in July 2011, the company engaged in unfair and deceptive acts or practices and violated Regulation E by (i) visiting consumers’ homes and places of employment to collect debts; (ii) contacting third parties for reasons other than to acquire consumers’ location information, which put consumers at risk of their information being disclosed to third parties, and ignoring requests to stop calling consumers’ workplaces; (iv) making false threats of litigation if consumers did not pay the past due amount; (v) misrepresenting the company’s ability to, and routine practice to, run credit checks on loan applicants; (vi) requiring consumers to pay using pre-authorized electronic fund transfers; (vii) causing consumers to incur fees from their banks due to electronic withdrawal practices; and (viii) misrepresenting a consumer’s ability to repay loans early and to revoke authorization for electronic withdrawal authorization. The CFPB’s administratively-filed consent order requires the company to pay $7,500,000 towards refunding consumers affected by its practices, and pay a civil money penalty of $3,000,000. In addition, the order prohibits the company from collecting on defaulted loans owed by approximately 130,000 consumers, and from engaging in unfair and deceptive debt collection practices in the future.  Read more…

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