A recent Consumer Financial Protection Bureau (CFPB) consent order requires an online lending platform to pay $3.63 million for failing to deliver benefits that it allegedly promised to consumers. The CFPB alleged that the lender had not given borrowers an opportunity to build credit and have access to less costly loans, as the lender had advertised. The lender's advertisements apparently indicated that borrowers could "graduate" to lower-priced loans, and that loans obtained would be "credit building opportunities." The lender allegedly did not report credit experience to credit reporting agencies for a lengthy period, so loans obtained from the lender were not helping borrowers establish credit profiles. In addition, the CFPB argued that the lender hid the true cost of credit through misleading internet banner ads, without disclosing the associated APR or by understating the APR. The resulting consent order requires the lender to make refunds to more than 50,000 borrowers (approximately $1.83 million); end deceptive advertising practices; ensure the accuracy of its loan pricing; and pay a $1.8 million civil penalty. The order serves as a reminder to FinTech providers that online and marketplace lenders need to be guided by the same disclosure principles that apply to traditional lenders.
Please contact Christopher Rahl for more information concerning this topic and similar FinTech disclosure issues.