Overseas Lender Prevented from Issuing Payday Loans in the U.S.
Inside Subprime: March 19, 2019
By Grace Austin
The Consumer Financial Protection Bureau has banned a foreign online payday loan firm from ever conducting consumer lending again in the United States, but is not requiring it to pay any fines.
The umbrella company, its majority owner, three corporate officials, and more than ten companies that are affiliated with the payday loan firm are banned from any consumer lending, according to the February 2019 settlement. The Canadian and Maltese company is accused of various bad behavior by the consumer watchdog agency, including marketing to and handing out payday loans to borrowers in states where it’s illegal or the interest rates exceeded the legal limit.
The legal case against the payday loan firm extends back to 2015, under previous director Richard Cordray, and new defendants have been added over the years by the bureau.
The CFPB claims that the payday loan firm did not acquire a license to operate payday lending operations. In many states, payday lending is legal, but lenders need a license to operate. The payday loan firm’s interest rates on payday loans exceeded state usury laws, in many cases, too.
From there, the payday loan firm tried to collect debt repayments from consumers on loans that were void because the company didn’t have licenses to operate and was issuing payday loans with interest rates above states’ legal limits. The payday loan firm would call and send letters to borrowers seeking repayment. In some cases, they did receive money from borrowers.
The payday loan firm claimed in its contracts that the company was subject to Maltese, not American, law.
Although the payday loan firm and the other defendants named are banned from marketing or issuing payday loans, there was no monetary fine handed down by the CFPB. This continues what critics have called a trend of soft penalties against bad financial actors by the bureau, as well as a lack of redress for consumers who were taken advantage of.
In February 2019, House Financial Services Committee Chairwoman Maxine Waters and Subcommittee on Oversight and Investigations Chairman Al Green asked the CFPB for more information on several recent settlements, including the payday loan firm, after a string of such CFPB cases with no or very minimal fines were given to defendants.
That letter, directed to head of the CFPB Kathleen Kraninger, also cited the 2015 amended complaint against the payday loan firm, which “sought ‘damages and other monetary relief as the Court finds necessary to redress injury through consumers resulting from [the payday loan firm’s] violations of federal consumer protection laws including but not limited to restitution and the refund of monies paid.’”
The two lawmakers further brought up the CFPB’s authorization against the Consumer Financial Protection Act of 2010 to provide monetary relief for consumers that have been taken advantage of by deceptive financial practices.
This could set up a contentious battle between the CFPB and Democratic lawmakers over concerns that the CFPB is not thoroughly punishing bad lenders and reimbursing American consumers.