Consumer Finance Insights
April 25, 2016

CFPB Initiates Enforcement Action Against Online Lead Aggregators

On April 21, 2016, the Consumer Financial Protection Bureau (CFPB) announced that it filed two lawsuits in federal court in the Central District for California against the founders of an online lead aggregator website, which allegedly sold loan applications to lenders and other companies without properly vetting the sources of the data or the purchasers of the data. The CFPB’s complaints, available here​ and here, allege the founders engaged in unfair business practices in violation Consumer Financial Protection Act.

Lead aggregators purchase loan applications from lead generators, which are typically websites that solicit loan applications from consumers.  Lead aggregators then sell the loan applications to lenders or other data mining companies. In this case, the founders’ company allegedly purchased payday and installment loan applications from lead generator websites and sold them to purchasers who did not comply with federal or state consumer protection laws. According to the CFPB, the company facilitated purchases from lead aggregators who failed to disclose to consumers how lenders were selected or whether the preferred lenders complied with state usury laws and other lending regulations. The company also allegedly permitted lenders who charged usurious interest rates and did not comply with state or federal lending regulations to purchase leads.  Because the company purportedly sold leads to the highest bidders (without regard to any other criteria), the CFPB alleged the company steered consumers to lenders who charged the highest interest rates or otherwise offered the most unfavorable loan terms. The CFPB alleged that these practices constituted unfair and deceptive practices in violation of the Consumer Financial Protection Act.

The CFPB seeks injunctive relief prohibiting the founders from violating the Consumer Financial Protection Act, damages, restitution to harmed consumers, disgorgement of revenues, and civil penalties.