On November 5, 2020, the CFPB named Driver Loan, LLC (“Driver Loan”) and its Chief Executive Officer as defendants in a two-count complaint filed in a Florida federal district court that alleges they engaged in deceptive acts and practices in violation of the Dodd-Frank Act’s UDAAP prohibition in connection with taking deposits from and making loans to consumers.
The Complaint alleges that since 2017, Driver Loan has been offering small-dollar, short- term, high-interest rate loans to consumers. It also alleges that in 2020, Driver Loan began taking deposits from consumers to fund its loans.
The Complaint alleges that the defendants engaged in deceptive practices by:
- Falsely representing that consumers’ deposits were held at FDIC-insured institutions, the deposits would have a guaranteed rate of return, and a new consumer was depositing funds with the company about every minute; and by
- Marketing its loans as having an APR of 440% when the actual APRs are about 975%.
An act or practice is deemed 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 under the circumstances. In support of its claim that that the defendants’ false representations regarding the deposit accounts were deceptive, the Bureau alleges that a consumer acting reasonably under the circumstances would believe that Driver Loan was offering a safe product. According to the Bureau, because the interest rates that Driver Loan charged were usurious under Florida criminal law, the defendants created a substantial risk that Driver Loan would not be able to collect delinquent loans or meet its obligations to consumers who sought to withdraw deposited funds.
The Bureau seeks injunctive and monetary relief, disgorgement, and the imposition of civil money penalties.