CFPB Sues Online Lender for Military Lending Act Violations
The CFPB sued an online lender and several subsidiaries for violating the Military Lending Act ("MLA") by, among other counts, imposing fees that exceeded the Act's limit of 36 percent Military Annual Percentage Rate ("MAPR").
In the Complaint, filed in the Southern District of New York, the CFPB alleged that the lender engaged in deceptive practices by (i) issuing loans at a rate higher than the maximum approved rate in the MLA when taking into account fees as well as interest, (ii) failing to provide required disclosures and (iii) requiring servicemembers to pay costly subscription fees to access the low-APR products.
The CFPB charged the lenders with making loans to servicemembers "by way of loan contracts requiring the borrowers to submit to arbitration in the case of a dispute, without exceptions for covered borrowers," in violation of the MLA.
The CFPB charged that the lender did not allow customers to cancel the lender's membership programs or avoid related membership fees without first paying back the loan in full. The CFPB alleged that many borrowers had fallen behind on payments and were unable to pay in full, and that the lender continued to charge membership fees despite advertising that the membership could be cancelled at any time for any reason. Further, the CFPB alleged that in certain instances, the lender still debited membership fees from customer accounts after paying back a loan in full.
The CFPB seeks an injunction and monetary restitution.
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