December 9, 2019

December 09, 2019

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CFPB enters into settlement with off-shore lenders

The CFPB has entered into a proposed settlement with a group of corporate and individual defendants who were alleged to have engaged in unlawful conduct in connection with offering “short-term loans to consumers located in the United States through a network of affiliated companies located in Canada and Malta.”

The settlement is intended to resolve a lawsuit filed by the CFPB against the defendants in 2015 in a New York federal district court that alleged the defendants made payday loans to residents of states in which the loans were void under state law because the defendants charged interest rates that exceeded state usury limits or the defendants failed to acquire required licenses.  The CFPB claimed that the defendants engaged in unfair, deceptive, or abusive conduct in violation of the CFPA through actions that included: (1) misrepresenting that consumers were obligated to pay debts that were void under state law and that the loans were not subject to U.S. federal or state law, and (2) misrepresenting that the defendants would sue consumers who did not pay or take other actions they did not intend to take.  The complaint also alleged that the defendants violated the Credit Practices Rule by conditioning the loans on irrevocable wage assignments.

The proposed Stipulated Final Judgment and Order sets forth the CFPB’s findings that the defendants had engaged in the alleged unlawful conduct and permanently bars the defendants from engaging in the following conduct:

  •  “advertising, marketing, promoting, offering, originating, servicing, or collecting” a consumer loan made to a U.S. resident, assisting others in such activities, or receiving any remuneration or other consideration from providing service to, or working in any capacity for, anyone engaged in or assisting with such activities
  • collecting on or selling any loans made to a U.S. consumer before the date the Order is entered
  • disclosing, using, or benefitting from information regarding U.S. consumers obtained before the date the Order is entered

The proposed settlement provides for no monetary penalty, something that has not gone unnoticed by consumer advocates.

Copyright © by Ballard Spahr LLP

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About this Author

Kaplinksy, partner, New York, finance
Partner

Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

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