The CFPB has filed a complaint in federal district court in New York against a group of commonly-controlled companies for allegedly engaging in unlawful conduct in connection with making payday loans over the Internet. With the exception of two defendants that are alleged to be incorporated in Malta, the defendants are alleged to be Canadian corporations. In its press release (but not in the complaint), the CFPB describes the action as a suit against an “offshore payday lender.”
According to the complaint, the defendants performed different functions such as purchasing leads from lead generation companies, brokering loans, originating loans, and collecting loans. The complaint alleges that the defendants made payday loans to residents of states in which the loans were void under state law because the defendants charged interest rates that exceeded state usury limits or the defendants failed to acquire required licenses.
The CFPB claims that the defendants violated the Dodd-Frank/Consumer Protection Act prohibition on unfair, deceptive, and abusive acts and practices by actions that included: (1) misrepresenting that consumers were obligated to pay debts that were void under state law and that the loans were not subject to U.S. federal or state law, (2) forcing consumers to pay illegal amounts they did not owe; and (3) misrepresenting that the defendants would sue consumers who did not pay or take other actions they did not intend to take. The complaint also alleges that the defendants violated the Credit Practices Rule by conditioning the loans on irrevocable wage assignments.
The relief sought by the CFPB includes restitution and refund of money paid by consumers on the allegedly void loans.
The new lawsuit is similar to the CFPB’s groundbreaking December 2013 lawsuit filed in Massachusetts federal court against CashCall, several related companies and their principal. The companies allegedly funded, purchased, serviced and collected online payday loans made by a tribally-affiliated lender the CFPB did not sue. The defendants were charged with engaging in unfair, deceptive and abusive acts and practices in seeking to collect loans that were purportedly void in whole or in part under state law because the lender charged excessive interest and/or failed to obtain a required license