The CFPB charged an online lender for Military Lending Act ("MLA") violations in connection with the extension of consumer credit to active-duty service members and their dependents ("covered borrowers").
As alleged in the CFPB Complaint filed in the United States District Court for the Northern District of California, the lender made over 4,000 single-payment or installment loans to over 1,200 covered borrowers that (i) imposed an annual percentage rate greater than 36%, (ii) imposed mandatory arbitration in the case of a dispute and (iii) failed to make required loan disclosures - all in violation of federal MLA protections. The CFPB further alleged that, as a result of the violations, each consumer credit agreement was void from the inception of the contract.
The CFPB is seeking an injunction against the lender that would prevent it from collecting any debts on the affected loans to covered borrowers, as well as an Order from the District Court requiring the lender to correct any inaccurate information furnished to consumer reporting agencies regarding amounts delinquent or owed on the agreements. The CFPB is also seeking damages, restitution, disgorgement and civil money penalties.
Commentary Rachel Rodman
Consumer installment lenders - and particularly FinTech lenders - should take note of the CFPB's action to enforce the MLA. This is not an authority often exercised by the CFPB and allows the agency directly to enforce the MLA's 36% usury cap and seek significant penalties. Here, the CFPB alleges that the lender's loans to covered service members were void ab initio and seeks an injunction preventing the lender from collecting any debts on the affected loans.
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