CFPB closes online lending fintech for violation of ECOA and CFPB consent order

On December 21, an online lending fintech agreed to a final judgment stipulated with the CFPB to resolve a September 2021 complaint alleging that the company had deceived consumers and violated the Equal Credit Opportunity Act (“ECOA” ) (we discussed this complaint in a previous article on the Finance & FinTech blog here). The stipulated final judgment prohibits the company from granting new loans, collecting outstanding loans from aggrieved consumers, selling consumer information and making false statements when granting loans or collecting debts or help others who do. The company also accepted a suspended monetary judgment of $ 40,500,000 and a civil fine of $ 100,000 due to its limited capacity to pay.

The September 2021 complaint alleged that the company had misrepresented consumers by announcing that borrowers who repaid their loans on time and take free online courses will benefit from lower interest rates on future loans and have access to larger loan amounts. This turned out to be wrong for tens of thousands of borrowers who were unable to qualify for larger loan amounts and continued to be offered similar or higher interest rates than previous loans.

Based on these allegations, the CFPB alleged that the company misled consumers about the benefits of repeat borrowing and violated a 2016 CFPB order that prohibited the company from misrepresenting the benefits of borrowing from of the company. The CFPB also alleged that the company violated ECOA and Regulation B by failing to provide notices of adverse action within 30 days to more than 7,400 loan applicants and by issuing more than 71,800 notices of adverse action within 30 days. ‘adverse action that did not accurately describe the main reason for the company’s refusal. loan applications.

Put into practice : This unilateral resolution shows the significant risks for FinTech companies that do not comply with consumer loan laws like the ECOA. FinTech companies, especially newer lending companies, should ensure that they comply with applicable laws, especially if they have been the subject of enforcement actions in the past.

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David A. Albanese