District Court denies motion to dismiss State Attorneys’ General case against “subprime lender”

Courts Pennsylvania CFPB CFPA State Attorney General New Jersey Washington Oregon District of Columbia

On January 12, the U.S. District Court for the Eastern District of Pennsylvania denied a defendant’s motion to dismiss a case brought by five State Attorneys General (State AGs) from Pennsylvania, New Jersey, Oregon, Washington, and D.C. seeking to enforce the CFPA. The State AGs allege the defendant engaged in “predatory lending practices” that violate state and federal law. As covered by InfoBytes, in Spring 2022, the CFPB issued an interpretive rule clarifying that states have the authority to enforce federal financial consumer protection laws, such as the CFPA. This interpretive rule led to partisan attacks claiming the CFPB was “colluding” with state regulators, as covered by InfoBytes here.

The defendant is a state-licensed and regulated “subprime installment lender” operating in 28 states. As noted in the opinion, the defendant offers loans between $1,000 and $25,000, with terms between 12 and 60 months and charges interest at rates ranging from 18.99% to 35.99% with an average APR of 28%, and average loan size of around $3,650.

In addition to the complaint regarding subprime loans, the State AGs assert that the defendant “deceptively ‘adds-on’” various insurance options to consumers’ loans and targets a financially vulnerable population: those with a credit score of 629 or less who “often already have significant… debt[.]”. The State AGs seek injunctive and other relief.