Read the complaint filed in the U.S. District Court for the District of South Carolina here

  • Source: consumerfinance.gov

Treliant Takeaway:

Treliant knows consumer protection, UDAAP, and marketing risk. This CFPB suit is a reminder that the Consumer Financial Protection Act (CFPA) coverage of UDAAPs is broad and that firms can create risks by assisting in others’ illicit activities. If you need assistance with assessing and managing your UDAAP and compliance risk, Treliant can help.

Article Highlights:

Building on 2019 CFPB enforcement actions against firms using deceptive acts and practices in marketing high-cost credit to veterans, the CFPB, together with the states of Arkansas and South Carolina, have filed suit against individuals and a firm that alleging the defendants committed deceptive acts and practices in brokering high-interest credit contracts and provided substantial assistance to the deceptive and unfair acts or practices of others.

Specifically, the suit alleges the defendants committed deceptive acts and practices and provided substantial assistance to other individuals’ and firms’ unfair and deceptive acts and deceptive misrepresentations by:

  • Developing an underwriting process for the high-interest credit contracts;
  • Underwriting the contracts, including approving or denying consumers’ applications to enter the transactions;
  • Running background checks on potential consumers;
  • Administering contract execution;
  • Acting as a custodian of consumer funds related to the contracts;
  • Serving as payment processor for the initial payment and fees and the ongoing payments;
  • Collecting on the contracts, including filing suit against consumers;
  • Stating that the consumers were subject to criminal prosecution for breaching the contracts when such prosecution was not possible; and
  • Representing that consumers were legally obligated to make payments in accordance with contract terms when the contracts were void and unenforceable.

All of the defendants in this suit provided services covered under the CFPA to defendants in prior suits and settlements related to assignments of disability or pension benefits for payment of debt or as security for payment of debt. Although marketed to consumers as purchases of the consumers’ future pension or disability payments, the contracts are considered loan transactions under the relevant state law.

Related enforcement activity:

CFPB and South Carolina Department of Consumer Affairs file lawsuits alleging UDAAPs in brokering high-interest credit.

CFPB proposes stipulated judgment related to brokered high-interest credit contracts.

CFPB settles suit alleging UDAAPs in marketing unenforceable pension assignment contracts.

Author

Lynn Woosley

Lynn Woosley is a Senior Director with Treliant.  She is a seasoned executive with extensive risk management experience in regulatory compliance, consumer and commercial credit risk, credit and compliance risk modeling, model governance, regulatory change management, acquisition due diligence, and operational risk in both financial services and regulatory environments.