United States: CFPB Announces Proposed Settlement of Lawsuit Alleging Short-Term Loan Provider Violated CFPA’s UDAAP Ban on Deposit Account Program
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The CFPB announced last week that he has entered into a proposed settlement with Driver Loan, LLC (“Driver Loan”) and its CEO to settle the November 2020 lawsuit he filed against Driver Loan and its CEO alleging that the defendants engaged in deceptive acts and practices in violation of the Dodd-Frank UDAAP prohibition on taking deposits and making loans to consumers.
In its complaint filed in a federal district court in Florida, the CFPB alleged that since 2017, Driver Loan has been offering high-interest, short-term, low-value loans to consumers. He also alleged that in 2020, Driver Loan began taking deposits from consumers to fund its loans. The CFPB alleged that the defendants engaged in deceptive practices by:
- Misrepresenting that consumer deposits were held in FDIC-insured institutions and would have a guaranteed rate of return.
- Marketing its loans as having an APR of 440% when actual APRs were over 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 is likely to mislead consumers acting reasonably in the circumstances. In support of its allegation that the defendants’ misrepresentations 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 substantial risk that Driver Loan could not collect overdue loans or meet its obligations to consumers seeking to withdraw deposited funds.
The draft final judgment and order stipulated would require the defendants to repay approximately $1 million in consumer deposits and pay a civil penalty of $100,000. It would also permanently prohibit defendants from engaging in filing activities and making misleading statements to consumers.
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