On November 15, the CFPB issued an order requiring an Illinois-based fintech lender to pay $15 million in fines. The order additionally prohibits the company from operating in certain lines of business and requires revision of its executive compensation policies.
The CFPB alleged widespread and persistent payment processing misconduct. The misconduct affected over 111,000 consumers according to the order and violated the terms of a previous settlement reached with the CFPB in 2019. The fintech lender allegedly (i) withdrew funds from customers’ bank accounts without their permission, (ii) made deceptive statements about loans, (iii) cancelled loan extensions, and (vi) failed to provide consumers copies of signed authorizations.
Specifically, the latest order requires the lender to:
- No Longer Offer Certain Short-term Loans: For a period of seven years, it cannot offer or provide close-end consumer loans that must be substantially repaid within 45 days.
- Remedy Auto-Debiting Processes: The company must obtain express informed consent from consumers prior to debiting funds.
- Revise Executive Compensation: Executive compensation policies and agreements must take into account the actions taken by executives to ensure compliance with the order and federal consumer financial laws within their respective business or department.
- Provide Redress to Consumers: It is required to offer compensation to all consumers whose accounts were debited by the fintech without their explicit informed consent. This includes returning to these consumers all unlawfully debited amounts, along with associated fees, costs, and interest.
- Pay a Civil Penalty: It will owe a civil penalty payment of $15 million to the CFPB victims relief fund.
Putting It Into Practice: This latest action is important for a couple of reasons. First, this action illustrated the important of consent order compliance, reinforcing the Bureau’s mandate to take action against repeat offenders (we have blogged about this topic here, here, here, and here). Not to be lost is that the order ties the fintech’s executive compensation policies to company compliance with federal consumer financial protection laws, which may intend to fall in line with the agency’s view that “[e]xecutives of big companies who call the shots as companies break the law should be held accountable.”