CFPB announces proposed settlement of lawsuit alleging short-term loan provider violated UDAAP ban on CFPA under deposit account program – Consumer Protection
United States: CFPB announces proposed settlement of lawsuit alleging short-term loan provider violated UDAAP ban on CFPA under deposit account program
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The CFPB announced last week that it had reached a proposed settlement with Driver Loan, LLC (“Driver Loan”) and its managing director to settle the lawsuit it filed in November 2020 against Driver Loan and its alleged CEO. that the defendants engaged in deceptive acts. and practices in violation of the Dodd-Frank Act’s UDAAP prohibition on taking deposits and granting loans to consumers.
In its lawsuit filed in Florida Federal District Court, the CFPB alleged that, since 2017, Driver Loan has offered consumers short-term, high-interest loans. He also alleged that in 2020 Driver Loan started receiving deposits from consumers to fund their loans. The CFPB alleged that the defendants engaged in deceptive practices by:
- Falsely represent that consumer deposits were held in FDIC insured institutions and would have a guaranteed rate of return.
- Market your loans as having an APR of 440% while actual APRs were above 900%.
An act or practice is considered deceptive in violation of the UDAAP prohibition if there is a material representation or omission of information that could mislead consumers acting reasonably in the circumstances. In support of its claim that the defendants’ false statements regarding deposit accounts were misleading, the Bureau alleged that a consumer acting reasonably in the circumstances would believe that Driver Loan offered a safe product. According to the Bureau, because the interest rates charged by Driver Loan were usurious under Florida criminal law, the defendants created a significant risk that Driver Loan would not be able to collect or meet overdue loans. its obligations to consumers who sought to withdraw deposited funds.
The draft final judgment and stipulated order would require defendants to reimburse approximately $ 1 million in consumer deposits and pay a civil fine of $ 100,000. It would also permanently prohibit defendants from engaging in deposit collection activities and making misleading representations to consumers.
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