CFPB alleges UDAAP violations by “lease-to-own” financer

Federal Issues CFPB Consumer Finance Enforcement CFPA FCRA Regulation E Regulation V Deceptive Abusive UDAAP

On July 19, the CFPB announced it is suing a lease-to-own finance company that provides services that allows consumers, typically with limited access to traditional forms of credit for their financing, to finance merchandise or services over a 12-month period. According to the complaint, the Bureau claims that once a consumer falls behind on payments, the company’s purchase agreement essentially “lock[s] [consumers] into the 12-month schedule—even if they want to return or surrender their financed merchandise.”  The alleged violations include:

• Misleading consumers. The company is accused of designing and implementing its financing program in a way that misleads consumers by using print advertisements featuring the phrase “100 Day Cash Payoff” without including details of the purchase agreement financing. The company is accused of misrepresenting that consumers could not terminate their agreement, that consumers could not return their merchandise, and that the “best” or “only” option for consumers who no longer want to finance their merchandise is to enter a “buy-back” agreement. The Bureau alleges that such conduct, among other things, violated the CFPA's prohibition on deceptive and abusive acts and practices.
• Unlawful conditioning of credit extension. The company is accused of violating the EFTA and its implementing Regulation E by allegedly improperly requiring consumers to repay credit through preauthorized automated clearing house debits.
• Failing to establish reasonable policies concerning consumer information. The Bureau alleges that the company violated the FCRA and its implementing Regulation V by not having adequate written policies and procedures to ensure the accuracy and integrity of consumer information that it furnished, considering the company’s “size, complexity, and scope.”

The Bureau seeks, among other things, injunctions to prevent future violations, rescission or reformation of the company's financing agreements, redress to consumers, and civil money penalties.