On December 16, 2015, the CFPB announced a consent order and settlement with a small-dollar lender concerning its debt collection practices in 15 states. According to the consent order, the lender’s unlawful conduct allegedly included: in-person collection visits at consumers’ homes and workplaces and phone calls to supervisors, landlords, and credit references, which can cause disclosure of the consumers’ debt to third parties and adverse employment consequences; “ACH splits” whereby the lender would make three simultaneous partial electronic withdrawals from consumers’ bank accounts, causing the consumers to incur bank fees; making empty threats of legal action; falsely telling consumers that credit checks would not be run on them; requiring consumers to pre-authorize electronic fund transfers in order to receive a loan; and lying to consumers about their ability to make early payments or stop electronic withdrawals or phone calls. The consent order asserts that this conduct violated the Consumer Financial Protection Act (CFPA), the Electronic Funds Transfer Act (EFTA), and the Fair Debt Collection Practices Act (FDCPA).
Under the consent order, the lender will refund $7.5 million to approximately 93,000 consumers, and pay $3 million in civil penalties. The lender must also stop collecting remaining payday and installment loan debts owed by approximately 130,000 consumers, making in-person debt collection visits, disclosing consumers’ debt to third parties, initiating electronic fund transfers from consumers’ accounts after a previous fund transfer has failed for insufficient funds, and requiring consumers to pre-authorize electronic fund transfers in order to receive a loan.