CFPB Consent Order Against Lender for Mutual Legal Assistance Violations | Weiner Brodsky Kider PC
The CFPB recently concluded a final judgment and order stipulated against a California-based online lender for allegations the company violated the Military Loans Act (MLA). The order was approved in a federal district court for the Northern District of California.
According to the CFPB complaint, filed on December 4, 2020, the company violated the MLA credit rate cap extension by imposing a military annual percentage rate (MAPR) above 36%. The MLA prohibits lenders from charging MAPR rates above 36% on closed credit extensions granted to covered borrowers.
In addition, the company has reportedly granted installment loans to more than 1,200 borrowers covered by the mutual aid agreement through loan agreements requiring borrowers to submit to arbitration. Requiring borrowers to submit to arbitration in a dispute is illegal under the MLA.
Finally, the CFPB alleged that the company failed to comply with the MLA’s requirement that creditors make loan disclosures to borrowers before or at the time the borrower becomes obligated to the creditor. According to the complaint, the company has granted more than 4,100 single payment or installment loans to covered borrowers without making all of the disclosures required by the MLA.
According to the final order, the company is to review all information provided to consumer intelligence agencies as of October 2016 regarding consumers affected by these violations and determine whether any information needs to be corrected. In addition, the company has 45 days from the entry of the final order on January 20, 2021 to submit its compliance plan to the CFPB regional director for approval. Although the company must submit certain documents to the regional manager for review, it is the company’s board of directors that is responsible for ensuring compliance with the MLA. If developments affect the company’s ability to comply with the MLA, the CFPB should be notified either 30 days prior to the development or as soon as possible if the development was unpredictable. Finally, the company must pay $ 300,000 in compensation to the consumers concerned and an additional $ 950,000 in civil penalties to the CFPB.