On February 20, the Consumer Financial Protection Bureau (CFPB), South Carolina Department of Consumer Affairs, and Arkansas Attorney General’s Office announced that they had filed a lawsuit in the U.S. District Court for the District of South Carolina against a group of defendants who brokered contracts offering high-interest credit to consumers, primarily disabled veterans. The agencies allege that these credit offers violate the Consumer Financial Protection Act (CFPA) and South Carolina state law.
The agencies allege that, in 2012, the defendants began working with several companies that brokered high-interest credit contracts. The brokers marketed their credit offers as purchases of consumers’ pensions or disability payments. Under these agreements, consumers received a lump-sum payment from investors. Consumers purportedly agreed to repay the offer of credit by assigning a portion of their pension or disability payments for several years – totaling a much larger amount than the initial payment. Most of these credit offers were made to disabled veterans.
The agencies allege that the defendants assisted the brokers by developing a pre-approval process for the contracts and conducting underwriting; approving or denying consumers’ applications to enter into the transactions; directing and administering the execution of the contracts; serving as the payment processor for the initial lump-sum payment and fees; and continuing to serve as the transactions’ payment processor.
The complaint seeks an injunction, redress to consumers, and civil money penalties.