On August 2, the CFPB filed a lawsuit in Georgia federal court against an auto-loan servicer alleging that the company engaged in various illegal practices that harmed consumers with auto loans. The auto-loan servicer offered both Guaranteed Asset Protection (“GAP”) and collateral-protection insurance, which are products that consumers can buy when they buy or lease a car.Continue Reading CFPB Sues Auto-Loan Servicer for Allegedly Harming Consumers
On July 31, the U.S. District Court for the Southern District of Texas enjoined the CFPB from implementing and enforcing the small business lending rule (Section 1071) requirements pending the Supreme Court’s decision in Community Financial Services Association of America Ltd. v. CFPB, a challenge to the constitutionality of the CFPB’s funding structure (we previously discussed Section 1071 rulemaking in prior blog posts here and here, and the Texas lawsuit here). In particular, the court enjoined the CFPB from implementing and enforcing the final rule against the plaintiffs and their members, but denied the plaintiffs’ request for a nationwide injunction. Continue Reading Texas Court Enjoins CFPB’s Enforcement of Small Business Lending Rule
On July 13, the FTC issued a press release announcing that it had reached a settlement with a bankrupt crypto platform. The New Jersey based company, which filed for bankruptcy in July 2022, marketed a variety of cryptocurrency products and services to consumers including interest-bearing accounts, personal loans secured by cryptocurrency deposits, and a cryptocurrency exchange. According to the FTC, the company and its executives induced consumers to deposit cryptocurrency by deceiving users and falsely promising access to deposits, high yields, and deposit security. The FTC complaint alleges that rather than securing these deposits, the platform took title to and misappropriated deposits totaling more than $4 billion. Specifically, it is alleged that the company used consumer deposits to fund operations, pay rewards to other customers, borrow from other institutions, and make high-risk investments. As the fiscal health of the company declined, executives concealed the fiscal condition of the company all the while protecting themselves by withdrawing significant sums of cryptocurrency from the platform two months before the company filed for bankruptcy.Continue Reading FTC Reaches Settlement with Crypto Platform
On July 19, the CPFB filed a complaint against a lease-to-own finance company, alleging that the company has offered and provided millions of “lease-purchase” and “rental-purchase” financing agreements in ways that have harmed consumers, including through misleading advertisements, insufficient disclosures, and interfering with consumers’ ability to understand the terms and conditions of its financing agreements. The CFPB additionally alleges that the company harmed consumers in servicing its lease-to-own financing products by misrepresenting payment obligations and making false threats in collections. Specifically, the CFPB alleges that the company engaged in the following illegal activity:Continue Reading CFPB Sues Lease-to-Own Finance Company for Allegedly Deceiving Consumers
On May 15, the Pennsylvania Attorney General Attorney General Michelle Henry announced a $11 million settlement with a rent-to-own lender and its subsidiaries accused of engaging in predatory financing practices. Among other claims, the AG alleged that the company and its subsidiaries disguised the nature of financing products it offered, concealed outstanding balances, engaged in deceptive collection practices, and used a web portal that allowed retailers to sign consumers up for financing without their knowledge. In particular, the lender disguised one-year rent-to-own agreements as “100-Day Cash Payoffs” and then concealed the balances owed. In its initial complaint, the AG alleged that these actions violated Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, Rental-Purchase Agreement Act, Goods and Services Installment Sales Act, and Fair Credit Extension Uniformity Act. The company did not admit to any of the Attorney General’s allegations and continues to expressly deny any wrongdoing in the case.Continue Reading Pennsylvania AG Targets Rent-to-Own Company for Alleged Deceptive and Predatory Practices
Over the last several years, the Securities and Exchange Commission (the “SEC”) and the Commodities Futures Trading Commission (“CFTC”) have been laser-focused on the use of so called “off-channel communications” in the financial services industry. On the theory that employees’ use of personal devices to communicate about business matters violates the “books and records” rules as these communications are not saved in company systems, regulators have conducted intrusive and extensive investigations requiring employees to turn over their personal devices for review. SEC Chairperson Gary Gensler recently stated that “bookkeeping sweeps are ongoing,” having resulted in well over $1 billion in fines so far. While the first round of investigations focused on the large banks, this “sweep” has since spread to hedge funds, credit rating agencies, online banking platforms, and now, to regional banks.Continue Reading SEC Off-Channel Communications Sweep
On May 5, the CFPB announced that it has sent payments totaling more than $22 million to approximately 6,500 individuals who were harmed by a Maryland-based debt-relief and credit-repair company that marketed and sold debt-relief and credit-repair services nationwide from 2016 to 2020. In 2021, a federal court entered a stipulated final judgement and order against the company and its executives for allegedly deceiving consumers into hiring the company with false promises to lower or eliminate their credit-card debts and to improve their credit scores in violation of consumer financial protection laws.Continue Reading CFPB, FTC Continue Crack Down on Debt Relief Schemes
On May 1, NYDFS settled with a cryptocurrency trading platform over the company’s cybersecurity deficiencies, resulting in a consent order and $1.2 million fine for the crypto company. NYDFS alleged “multiple deficiencies in the Company’s cybersecurity program” discovered during NYDFS examinations in 2018 and 2020. The examinations prompted an investigation, ultimately leading to the consent order and the fine.Continue Reading New York Settles with Crypto Company, Proposes Crypto Legislation
On April 26, an association of Texas state banking organizations and a Texas minority depository institution filed a joint complaint against the CFPB in Texas federal court seeking to invalidate a recently finalized agency rule requiring lenders to gather and report data on loan applications from minority, LGBTQ+, and women-owned small businesses (see previous blog post detailing this rule here). The CFPB rule requires that small business lenders must collect and report on the following data points:Continue Reading Lawsuit Challenges CFPB Reporting Rule for Small Business Lending
On April 25, the CFPB, FTC, EEOC, and Civil Rights Division of the DOJ issued a joint statement outlining the agencies’ collective commitment to monitor the development and use of automated systems and artificial intelligence and enforce their respective authorities where such systems produce outcomes that result in unlawful discrimination. The joint statement explains that potential discrimination in automated systems can come from different sources, including:Continue Reading Federal Regulators Remain Focused on AI-based Discrimination