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Financial Services Law Insights and Observations

CFPB charges online lender with MLA violations

Federal Issues CFPB Enforcement Online Lending Courts Military Lending Military Lending Act

Federal Issues

On December 4, the CFPB announced it filed a complaint in the U.S. District Court for the Northern District of California against a California-based online lender alleging violations of the Military Lending Act (MLA). According to the CFPB, the “action is part of a broader Bureau sweep of investigations of multiple lenders that may be violating the MLA,” which provides protections connected to extensions of consumer credit for active-duty servicemembers and their dependents. The complaint alleges that since October 2016 the lender, among other things, made more than 4,000 single-payment or installment loans to over 1,200 covered borrowers in violation of the MLA. Specifically, the Bureau claims that these violations include (i) extending loans with Military Annual Percentage Rates (MAPR) exceeding the MLA’s 36 percent cap; (ii) requiring borrowers to submit to arbitration in loan agreements; and (iii) failing to make certain required loan disclosures, including a statement of the applicable MAPR, before or at the time of the transaction. The complaint seeks an injunction against the lender that would require the lender to “correct inaccurate information furnished to consumer reporting agencies concerning loans that were void ab initio,” and would prohibit it from collecting on those loans and require it to rescind the credit agreements on those loans. The complaint also seeks damages, redress, disgorgement of ill-gotten gains, and civil money penalties.

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