- Source: consumerfiles.gov
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Consent Order Highlights:
The Consumer Financial Protection Bureau (CFPB) has entered into a consent order with non-bank lender for violations of the Military Lending Act (MLA) and the Electronic Fund Transfer Act (EFTA) for conditioning loans to servicemembers on repayment by allotment or preauthorized electronic fund transfers. The lender offers installment loans and specializes in lending to members of the military.
According to the consent order, the lender allegedly violated the MLA by requiring borrowers to repay loans by allotment – a method of designating a portion of military pay to a recipient other than the servicemember – in order to receive credit. In addition, the lender allegedly violated the EFTA by requiring all borrowers, regardless of repayment method chosen by the borrower, to provide bank account and routing information and sign a contract preauthorizing the lender to initiate an electronic fund transfer on the first business day following the due date of a missed payment.
The consent order requires the lender to:
- cease requiring repayment by allotment or preauthorized funds transfer;
- notify covered military borrowers repaying by allotments of alternate repayment methods and cease processing payments by allotment unless the borrower reauthorizes the allotment;
- cease initiating electronic funds transfers against the bank accounts of borrowers (unless the borrower has selected electronic funds transfer as the primary loan repayment method) without obtaining a new electronic funds transfer authorization;
- ensure that employees, agents, and contractors are not incentivized to seek repayment by allotment;
- provide written statements for each billing cycle;
- develop and implement a CFPB-approved compliance plan; and
- Pay a civil money penalty of $2,175,000.
This consent order continues the CFPB’s focus on activities associated with debt collection. If your institution needs assistance in ensuring your lending and collections compliance management system meets regulatory expectations, Treliant can help.