On January 23, 2019, the Consumer Financial Protection Bureau (CFPB) announced that it had entered into a consent order with a loan broker, resolving allegations the broker’s offering of high-interest credit to veterans on behalf of several unnamed companies had thereby violated the Consumer Financial Protection Act (CFPA), 12 U.S.C. §§ 5531, 5536.
The CFPB alleged that the broker facilitated high-interest loans to veterans that were marketed as purchases of veterans’ future pension or disability payments, even though federal law prohibits agreements involving the transfer of rights to receive veterans’ pension payments. The transactions were allegedly structured as sales rather than loans in order to avoid interest-rate limits. Although the broker did not lend money to veterans himself, the CFPB alleged that he deceptively and unfairly misled consumers as to the nature of the transactions and deprived them of necessary information, such as the effective interest rate being charged for the “purchases.”
Under the consent order, the broker is permanently banned from brokering similar arrangements between veterans and lenders. The broker will also pay a civil money penalty of $1, based on his sworn statement that he lacks the ability to pay more and based on his ongoing cooperation with the CFPB’s investigation.