The CFPB recently filed a lawsuit against a Texas-based payday lender in Texas federal court alleging that the lender engaged in unfair, deceptive and abusive practices by concealing free repayment plan options from eligible borrowers and initiating unauthorized withdrawals from consumer debit cards in violation of the Consumer Financial Protection Act of 2010 (CFPA).
According to the CFPB complaint, the lender is required by its national trade association to offer free repayment plans that would allow borrowers to repay their outstanding balance in four equal installments over four pay periods without having to pay any fees or charges. additional interest. However, rather than informing borrowers of their right to these repayment options, the lender instead encouraged borrowers to re-borrow from the lender by refinancing their loans. Since 2014, this practice has resulted in borrowers paying more than $240 million in refinance fees while eligible for the free repayment plan.
In addition to the lender’s failure to notify borrowers of the availability of these repayment plans, the lender also attempted to collect loan repayment by making unauthorized withdrawals from consumers’ debit accounts. Once discovered, the lender claimed to have repaid all the money collected through unauthorized withdrawals dating back to January 1, 2018. However, the lender was unable to prove to Bureau examiners that any of the $1.3 million in unauthorized withdrawals was repaid to one of 3,000 affected borrowers.
This complaint follows a 2014 consent order against the same lender regarding alleged practices that also violated the CFPA when the lender encouraged consumers who could not repay their current loans to take out new loans, including additional fees. As a result of the consent order, the lender was ordered to pay $5 million to affected consumers as well as a $5 million fine.
The CFPB is seeking a permanent injunction against the lender, civil monetary penalties, attorneys’ fees, and any relief necessary to repair the harm caused to consumers.