Blog Enforcement Watch October 03, 2019

CFPB, South Carolina Bring Action Against Brokers of Pension Loans

On October 1, 2019, the Consumer Financial Protection Bureau (CFPB) and the South Carolina Department of Consumer Affairs (SCDCA) announced that they had filed a lawsuit in the United States District Court for the District of South Carolina against two brokerage companies for alleged violations of the Consumer Financial Protection Act and South Carolina Consumer Protection Code.

The CFPB and SCDCA allege that the companies marketed credit offers as “purchases of consumers’ future pension or disability payments” and represented that the products were “sales of payments and not high-interest credit offers.”  The majority of the agreements were between investors and consumers who were veterans with disability pensions or pensions administered by the Defense Finance and A​ccounting Service.  Although advertised as “sales of payments,” the CFPB and SCDCA allege that the transactions were loans carrying loan finance charges in excess of 12% per year.”​  The complaint alleges that federal law prohibits agreements under which a person acquires the right to receive a veteran’s pension payments, and that the loans were also illegal under South Carolina law because the companies were not properly licensed under South Carolina law and because South Carolina law prohibited earnings-assignment loans.

​The CFPB and SCDCA seek an injunction, damages, redress, disgorgement, civil money penalties, and enforcement costs.