CFPB Slaps Fines on Two Lenders in Two Days
Within a two-day span, the CFPB ordered two companies in separate cases to pay a total of more than $12.6 million in civil penalties and refunds. The agency levied a hefty $9 million civil penalty Sept. 26 against auto title lender TMX Finance for providing consumers misleading information about terms and costs to steer them into costly loan renewals. On Sept. 27, the CFPB took action against online lender Flurish Inc., dba LendUp, for not delivering on the promised benefits of its products, and the agency imposed a $1.8 million civil penalty and ordered Flurish to refund approximately $1.83 million to more than 50,000 consumers.
The CFPB determined that TMX Finance employees would offer consumers a monthly loan payment option, but then offer a “voluntary payback” option that entailed smaller payments over a longer period of time by repeatedly renewing the loan. The total costs of the loans weren’t explained and employees steered consumers to the more costly “voluntary payback” option, according to the consent order.
Savannah, Ga.-based TMX Finance, which has more than 1,300 storefronts that go by TitleMax, TitleBucks and InstaLoan in 18 states, also used illegal debt collection tactics by having employees go to customers’ homes, neighbors and places of employment to collect past-due debt. During these visits, employees would reveal past-due debt information to family members, neighbors, roommates, coworkers and supervisors, according to the consent order.
“TMX Finance lured consumers into more expensive loans with information that hid the true costs of the deal,” said CFPB Director Richard Cordray. ”They then followed up with intrusive visits to homes and workplaces that put consumers’ personal information at risk.”
San Francisco-based LendUp, which offers single-payment and installment loans in 24 states, began marketing its loans and financial education courses in 2012 as a way for consumers to build credit, improve their credit scores and eventually qualify for loans through LendUp with better terms. However, the CFPB determined that the company didn’t offer some products in states where it advertised, gave consumers inaccurate information about the true cost of loans and didn’t always properly provide information to credit reporting bureaus, according to the consent order.
The California Department of Business Oversight assisted in the investigation that showed “persistent failure by LendUp to comply with California consumer protection laws,” according to a Sept. 27 announcement by the DBO. The company agreed to a $2.68 million settlement, in which $1.62 million will refund customers charged illegal fees and interest. The remainder will go toward a $100,000 penalty and more than $965,000 to cover costs.
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