On December 1, the CFPB and a financial services company filed a stipulated proposed court order seeking the resolution of a CFPB suit alleging that the financial services company made false, misleading, and inaccurate marketing representations to consumers regarding its “high yield” savings account offering. In its original complaint, the CFPB alleged that the financial services company engaged in four separate false representations to consumers in violation of the CFPA:
- that consumer deposits would be used to originate loans for healthcare professionals and that it would have investors lined up to purchase the loans before making them, when in fact, it never used deposits to originate loans and never contracted with any investors to purchase loans.
- that consumer deposits would be held in an FDIC-insured account when not being used to originate loans, when in fact, deposits were invested in actively traded securities, crypto assets, or loaned to investors using individual stock portfolios as collateral.
- that it was a commercial bank and its high yield savings account was akin to a traditional savings account, when in fact, it was not a commercial bank and it invested consumer deposits in highly volatile securities.
- that its high yield savings accounts paid interest rates between 5 and 6.25 percent in the years prior to 2019, when in fact, it did not even begin taking consumer deposits August 2019.
The proposed settlement sets forth the following agreed upon actions that the financial services company will take: (i) refund approximately $19 million to approximately 400 affected depositors, (ii) permanently refrain from engaging or assisting others in any deposit taking activities, and (iii) pay a $391,530 fine to the CFPB, a portion of which will be remitted due to the financial services company having already paid a penalty to the SEC as a result of a similar action.
Putting it into Practice: This CFPB action makes clear that enforcing penalties against consumer-facing finance companies engaging in false advertising remains a high priority for federal consumer protection agencies (see previous blog post here). This action also reinforces recent agency crackdowns on dark patterns, junk fees, and similarly deceptive practices (see previous blog posts here and here). Financial services companies that market to consumers should therefore review the complaint and continually ensure that their representations to consumers regarding product offerings and services are accurate and clear.