CFPB Sues Four Online Lenders for Illegal Debt Collecting
The Consumer Financial Protection Bureau has filed a lawsuit against four online lenders for illegal debt collection practices. The companies collected money for loans that had been voided due to state laws; the consumers no longer owed money.
The CFPB’s lawsuit targets Golden Valley Lending, Inc., Mountain Summit Financial, Inc., Silver Cloud Financial, Inc., and Majestic Lake Financial, Inc. These companies operate much like brick-and-mortar payday loan providers, but they process applications and disburse funding online. Loans range from $300 to $1,200, and they come with an interest rate of up to 950% per year.
Seventeen states throughout the country have banned or put limits on loans like this, and the aforementioned lenders violated those terms. They also did not have the licenses to lend money in all those states. Furthermore, the lenders did not disclose the annual percentage rate for their loans on their websites or in phone calls with representatives. They collected funds through direct transfers from their customers’ bank accounts, often without their information—they received a paper check payment and used that to create a direct transfer.
The CFPB aims to prevent unlawful debt collecting from occurring in the future, and are seeking financial compensation for those affected by the practices. They are also charging a penalty against the lenders, but the amount has not yet been disclosed.