CFPB reaches $2 million settlement with installment lender for MLA, EFTA violations
On December 30, the CFPB announced a settlement with a Nevada-based consumer lender resolving allegations that the company violated the Military Lending Act (MLA), the Electronic Fund Transfer Act (EFTA), and the CFPA when making installment loans. The settlement is part of “the Bureau’s sweep of investigations of multiple lenders that may be violating the MLA.” According to the Bureau, the company allegedly made loans to active-duty servicemembers and their dependents (covered borrowers) in violation of the MLA by requiring borrowers to repay installment loans by “allotment.” Additionally, the Bureau alleges that the company violated the EFTA by requiring all of its covered borrowers to authorize the company “to initiate an electronic-fund transfer on the first business day after the due date of a payment that has been missed.” This requirement, the Bureau states, violates the EFTA’s prohibition against requiring borrowers to preauthorize electronic-fund transfers as a condition of receiving credit.
Under the terms of the consent order, the company is required to pay a $2.175 million civil money penalty, and must also, among other things, (i) provide notice of the Bureau’s consent order to all covered borrowers repaying their loans by allotment, along with notice that they may elect to change their repayment method; and (ii) provide training to employees involved in loan origination. Furthermore, the company is prohibited from accepting payment by allotment without first obtaining signed authorization from the borrower, and is banned from providing any incentives to employees or considering the number or rate of consumers who elect to repay by allotment during performance evaluations.