CFPB and South Carolina take action against loan broker for veteran pension loans
On October 1, the CFPB and the South Carolina Department of Consumer Affairs filed an action in the U.S. District Court for the District of South Carolina against two companies and their owner, alleging that the defendants violated the Consumer Financial Protection Act (CFPA) and the South Carolina Consumer Protection Code (SCCPC) by offering high-interest loans to veterans and other consumers in exchange for the assignment of some of the consumers’ monthly pension or disability payments. The complaint alleges that the majority of the credit offers are brokered for veterans with disability pensions or retirement pensions. The defendants allegedly did not disclose to consumers the interest rates associated with the products, marketing the contracts as sale of payments and not credit offers. The defendants also allegedly did not disclose that the contracts were void under federal and state law, which prohibit the assignment of certain benefits. The Bureau and South Carolina are seeking injunctive relief, restitution, damages, disgorgement, and civil money penalties.
The Bureau’s announcement notes that this is the third action in 2019 related to the marketing or administration of high-interest credit to veterans. As previously covered by InfoBytes, in January 2019, the Bureau settled with an online loan broker resolving allegations that the broker violated the CFPA by operating a website that connected veterans with companies offering high-interest loans in exchange for the assignment of some or all of their military pension payments. Additionally, in August 2019, the Bureau and the Arkansas attorney general announced a proposed settlement with three loan brokerage companies, along with their owner and operator, for allegedly misrepresenting high-interest credit offers to veterans and other consumers as purchases of future pension or disability payments (covered by Infobytes here).