CFPB Proposes Settlement with Loan Originator for Misuse of Customer Funds
Commentary by Steven Lofchie
The CFPB proposed a settlement of claims against a healthcare-focused loan origination company for misleading customers about how it handled customer deposits.
In the U.S District Court for the Southern District of New York, the CFPB alleged that the company falsely claimed customer deposits would be used to originate loans for healthcare professionals, and that unutilized funds would be placed in insured accounts or backed by cash alternatives with a guaranteed return of between 5 and 6.25 percent. The CFPB claimed that the company did not originate any loans, and instead used customer funds to (i) invest in a hedge fund controlled by the company's founder, as well as in crypto-assets and other securities and (ii) make loans to other investors using individual stock portfolios as collateral.
If the CFPB's Proposed Order is approved, the company would agree to (i) pay approximately $19 million in restitution, (ii) a permanent ban from engaging or assisting others in any deposit-taking activities, and (iii) pay a civil monetary penalty of $391,530.
Commentary
Why is this not treated as a criminal case where individuals go to jail? This appears to be more than a mere regulatory violation.