CFPB Sues Peer-to-Peer FinTech Company Over CFPA Violations

Earlier this month, the CFPB filed suit in the U.S. District Court for the Central District of California against a nationwide lending company utilizing a peer-to-peer platform to assist borrowers in obtaining small, short-term loans.  According to the Bureau’s complaint, the company allegedly misrepresented the loans to be “interest-free” in violation of the Consumer Financial Protection Act (CFPA).

The CFPB asserts the company’s claim of “no-interest loans” is a misrepresentation because loans taken out through the platform include a tip fee credited to the lender, a required “donation” that goes towards the platform, or both.  The CFPB also asserts the company led borrowers to believe it would furnish negative credit information to credit bureaus based on late or missed payments; however, no such reports were made by the company.  According to the complaint, such misrepresentations violate the CFPA.  

Further, the CFPB alleges the company engaged in unfair, deceptive, and abusive conduct by making, servicing, and collecting on loans made in states without the requisite licensing or loans in excess of state interest-rate caps. The CFPB also alleges the company attempted unfair collections of amounts consumers did not owe, and violations of the Fair Credit Reporting Act for failure to maintain reasonable procedures to ensure the accuracy of the consumers’ data in credit reporting.