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Financial Services Law Insights and Observations

CFPB declines to stay $51 million order for online payday lender

Federal Issues CFPB Online Lending Enforcement Payday Lending TILA EFTA CFPA Unfair Deceptive UDAAP Appellate Tenth Circuit

Federal Issues

On March 9, the CFPB denied a request made by a Delaware online payday lender and its CEO (collectively, “respondents”) to stay a January 2021 final decision and order requiring the payment of approximately $51 million in restitution and civil money penalties, pending appellate review. As previously covered by InfoBytes, in 2015, the Bureau filed a notice of charges alleging the respondents (i) continued to debit borrowers’ accounts using remotely created checks after consumers revoked the lender’s authorization to do so; (ii) required consumers to repay loans via pre-authorized electronic fund transfers; and (iii) deceived consumers about the cost of short-term loans by providing them with contracts that contained disclosures based on repaying the loan in one payment, while the default terms called for multiple rollovers and additional finance charges. Former Director Kathy Kraninger issued the final decision and order in January, affirming an administrative law judge’s recommendation that the respondents’ actions violated TILA, EFTA, and the CFPA’s prohibition on unfair or deceptive acts or practices by, among other things, deceiving consumers about the costs of their online short-term loans.

The Bureau’s March 9 administrative order determined that respondents (i) failed to show they have a substantial case on the merits with respect to their argument regarding ratification as an appropriate remedy for the respondents’ alleged constitutional violation; (ii) failed to show they “suffered irreparable harm” because the Bureau’s final decision does not infringe on the respondents’ constitutional rights and merely requires them to pay money into an escrow account; and (iii) failed to demonstrate that staying the final decision would not harm other parties and the public interest because the respondents might “dissipate assets during the pendency of further proceedings,” potentially impacting future consumer redress. The administrative order, however, granted a 30-day stay to allow respondents to seek a stay from the U.S. Court of Appeals for the Tenth Circuit.

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