CFPB Settles with Lender for $20 Million to Resolve Deceptive Sales Allegations

The CFPB recently entered into a consent order with an installment lender to resolve allegations of deceptive sales practices concerning its add-on products.  As part of the consent order, the lender will pay $20 million, of which $10 million are civil money penalties.

The CFPB alleged that the lender marketed, sold, and financed optional credit insurance and non-credit insurance add-on products in connection with its loan originations and renewals.  The add-on products were added to consumer loans and subject to a finance charge.  In some instances, the lender charged a pre-computed interest, which it then added to the consumer’s starting principal balance.  The lender marketed that consumers could cancel these products for a full refund within the prescribed period.  Otherwise, consumers could cancel for a refund of the unearned portion of the product.

Following an investigation into the lender’s business practices, the CFPB found that the lender had misrepresented the refund policy of these products.  While the lender had marketed that consumers would get a full refund if they cancelled during the prescribed period, it had only refunded the fees associated with the products.  Relatedly, the CFPB found that the lender had failed to refund the pre-computed interest that had accrued during the prescribed period.  In instances when the lender had disclosed the products prior to adding them to the loans, the CFPB found that the lender had misrepresented either the availability of a cost-free trial period or the requirement to purchase.  In other instances, the CFPB found that the lender had added the products without the consumers’ knowledge.  In both instances, the CFPB claimed that it interfered with the consumers’ ability to understand that the products were optional.

As part of the consent order, the lender will pay $10 million in consumer redress and $10 million in civil money penalties.  The lender will also have to submit a compliance plan that includes enhanced policies and procedures to prevent and detect improper sales practices, and enhanced product disclosures.  Additionally, the lender will have to submit yearly compliance progress reports that are approved by the board and sworn to under the penalty of perjury by its CEO.

In agreeing to the settlement, the lender did not admit or deny the CFPB’s allegations.