CFPB Settles with Payday Retail Lender

On February 1, 2019, the CFPB settled with an Indiana-based financial services company that owns and operates 37 payday retail lending outlets in seven states.  The settlement resolves alleged violations of the CFPA, GLBA/Regulation P, and TILA/Regulation Z.  The Bureau alleged that the companies engaged in unfair or deceptive acts or practices, failed to provide consumers with required initial privacy notices, and failed to properly disclose annual percentage rates.  The consent order requires the company to pay a civil money penalty of $100,000.

CFPA

The Bureau found that the company had “inadequate processes to reasonably prevent unauthorized charges of, debits to, and overpayments by borrowers.”  As a result, the company debited funds from customers who had already paid their loans, and failed to promptly identify and refund customer overpayments.  Wrongly debiting customer accounts likely caused customers to incur overdraft or non-sufficient funds fees.  Further, the company required consumers to list their personal telephone numbers and telephone numbers for their employers, supervisors, and four other personal references, and then repeatedly placed calls to these references to collect debts.

The Bureau alleged that the company used the reference information as telemarketing leads, and made repeated marketing calls to the individuals listed as references on consumers’ loan applications.  Further, the company advertised unavailable services, including check cashing, phone reconnections, and home telephone connections, on the storefronts’ outdoor signage.

GLBA/Regulation P

The Bureau alleged that the company violated GLBA/Regulation P when it failed to provide initial privacy notices to consumers who had paid off a loan in full, and subsequently took out a new loan.  According to the Bureau, when these consumers take out new loans, they are establishing a new customer relationship with the lender, and therefore require a new initial privacy notice.

TILA/Regulation Z

According to the Bureau, the company violated TILA/Regulation Z by failing to include a payday loan database fee charged to Kentucky customers in the APR that it disclosed in its loan contracts and advertisements.  In further violation of TILA/Regulation Z, the Bureau also found that the company disclosed an example APR and payment amount that was based on an example term of repayment without disclosing the corresponding repayment terms used to calculate that APR, and rounded APRs to whole numbers in advertisements.