United States: CFPB Announces Proposed Litigation Settlement Alleging Short-Term Loan Provider Violated CFPA UDAAP Ban in Relation to Deposits Account Program
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CFPB announced last week that he entered into a proposed settlement agreement with Driver Loan, LLC (“Driver Loan”) and its CEO to settle a November 2020 lawsuit against Driver Loan and its CEO, alleging that the defendants were fraudulent and in violation the UDAAP ban of the Dodd-Frank Act in connection with the acceptance of deposits and the issuance of loans to consumers.
In his complaint Filed in Florida Federal District Court, the CFPB argued that since 2017, the Driver’s Loan has offered consumers short-term, high-interest rate loans for small amounts. It also claimed that in 2020, Driver Loan began accepting deposits from consumers to fund its loans. The CFPB argued that the defendants resorted to deception:
- The misconception that consumer deposits are held in FDIC-insured institutions and will have a guaranteed return.
- Marketing your loans with an annual interest rate of 440% when the actual annual interest rate was in excess of 900%.
An act or act is considered misleading in violation of the UDAAP prohibition if there is a material presentation or omission of information that could mislead consumers acting reasonably under the circumstances. In support of its claim that the Defendants’ false statements regarding deposit accounts were deceptive, the Bureau stated that a consumer acting reasonably under the circumstances would believe that the Driver’s Loan offered a safe product. Because the interest rates charged by the driver loan were usurious under Florida criminal law, the Bureau said there was a significant risk that the driver loan would fail to collect overdue loans or meet its obligations to consumers who sought to withdraw deposited funds.
Proposed Intended Final Judgment and Order will require the defendants to return a deposit of approximately $ 1 million to consumers and pay a civil fine of $ 100,000. It would also permanently prohibit defendants from engaging in deposits and making misleading statements to consumers.
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