CFPB Enters Consent Orders with Military Travel Lender and Servicer for Undisclosed or Overcharged Fees, False Rate Quotes, and Credit Reporting Violations

The CFPB entered into consent orders with a lender and a servicer of military travel loans due to failures to disclose fees, false rate quotes, overcharges for fees, and failures to have adequate policies and procedures for furnishing information to credit reporting agencies.

The lender sold and financed airline tickets to military servicemembers and their families.  The lender added an additional fee to the airline tickets sold through financing which it did not apply to tickets it sold where the borrowers paid in full at the time of purchase.  Though this was a financing fee, it was not disclosed as part of the finance charges or the APR.  Additionally, when prospective borrowers spoke with the company by phone about the financing, the customer service representatives often stated that the applicable interest rates were lower than they actually were, and also did not disclose the APR.  The CFPB found that these actions violated the TILA, its implementing Regulation Z, the CFPA, and—with respect to the information provided by phone—the Telemarketing Sales Rule.

The lender’s Consent Order covered both the company and its individual owner, and they were jointly required to pay approximately $3.47 million in equitable monetary relief and damages, but were given a nominal civil monetary penalty of only $1.  Additionally, the lender and the individual owner are subject to various recordkeeping, reporting, and compliance monitoring requirements, and must seek certain approvals from the CFPB if they resume operations.

For the Consent Order with the servicer, the CFPB found that borrowers could obtain an optional debt cancellation plan which provided that the debt would be forgiven if the borrower became permanently disabled.  The plan required payment of an additional fee with the borrower’s monthly loan payments, and the fee was supposed to decline over the life of the loan as the principal balance decreased.  In fact, the servicer did not reduce the fee as the loan was paid off, thus overcharging borrowers.  The CFPB found that the servicer engaged in deceptive acts and practices in violation of the CFPA in connection with the fees for the debt cancellation plan.  Additionally, the CFPB found that the servicer did not establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the information it provided to credit reporting agencies about the borrowers in violation of the FCRA.

The servicer was required to pay redress to borrowers of approximately $54,600, and a civil money penalty of $25,000 to the CFPB.  Additionally, the servicer is subject to various recordkeeping, reporting, and compliance monitoring requirements.