InfoBytes Blog
CFPB settles with fintech over loan scheme operation
On July 12, the CFPB announced a consent order against a Georgia-based fintech company for allegedly enabling contractors and other merchants to take out loans on behalf of thousands of consumers who did not authorize them. According to the CFPB, the respondent allegedly violated the CFPA’s prohibition against unfair acts or practices by (i) servicing and facilitating the origination of unauthorized loans to consumers and (ii) enabling unauthorized loans by, among other things, failing to implement appropriate and effective controls during the loan application, approval, and funding processes. The CFPB noted that over 6,000 complaints were filed between 2014 and 2019 about the respondent, with some consumers claiming to have no prior involvement or knowledge of the respondent before receiving billing statements and collection letters. Under the terms of the consent order, the respondent must verify consumers’ identities and confirm their authorizations before activating loans or disbursing loan proceeds and implement an effective consumer complaint management program, exercising oversight of third-party merchant partners, and implementing uniform standards regarding the write-off of illegal loans. The respondent is also ordered to pay up to approximately $9 million in redress to its victims and a $2.5 million civil money penalty.