Blog Enforcement Watch September 30, 2022

CFPB Launches Lawsuit Against Online Lender Alleging Violations of the Military Lending Act

​On September 29, 2022, the Consumer Financial Protection Bureau (CFPB) announced that it filed suit in the United States District Court for the Southern District of New York against an online lender and 38 of its subsidiaries for alleged violations of the Military Lending Act (MLA), 10 U.S.C. § 987, and its implementing regulation, 32 C.F.R. pt. 232, and for​​ unfair, deceptive, and abusive acts under the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. § 5536​(a)(1)(B)​.

The CFPB alleges that the online lender charged more than the legally allowable 36% rate cap on loans to servicemembers based on a combination of stated interest rates and monthly membership fees in violation of the MLA, and further deceived servicemembers by representing that they owed payments and fees that were void under the MLA.  Additionally, the CFPB alleges that the lender required customers to join a $20-30 monthly membership program to access certain lower APR loans, and falsely led servicemembers to believe they could cancel their membership at any time.  In fact, according to the CFPB, the lender did not allow consumers to cancel their memberships if they had outstanding loan balances or unpaid membership fees. ​

The CFPB’s lawsuit seeks to permanently enjoin the lender and its subsidiaries from violating the MLA and the CFPA in the future, an order for defendants to pay damages, restitution, monetary relief to consumers, and disgorgement​ or compensation for unjust enrichment, civil money penalties, and an award of costs or additional relief as the Court deems just and proper.​

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