The CFPB announced that it has entered into a consent order with Military Credit Services, LLC, a company providing revolving credit to military consumers, to settle allegations that the company’s open-end credit agreements violated the Truth in Lending Act and the Electronic Fund Transfer Act. MCS had entered into a consent order with the CFPB in 2014 to settle a complaint that named several other companies as defendants, including Freedom Stores, Inc. (Freedom), a retailer catering to military customers that offered financing through retail installment contracts. While that complaint charged MCS with TILA violations similar to those described in the new consent order, it only charged Freedom with similar EFTA violations. Nevertheless, the 2014 consent order required all defendants to ensure that their contract provisions included required EFTA disclosures and required TILA account-opening disclosures.
According to the new consent order (whose findings of fact and conclusions of law are not admitted or denied by MCS), the provision in MCS’s revolving credit agreements that authorized electronic payments were not “clear and understandable” as required by the EFTA and Regulation E. The consent order also states that the credit agreements violated TILA and Regulation Z because they did not include all required account-opening disclosures in the required form, such as the APR that corresponds to each periodic rate that may be used to compute the finance charge.
The consent order requires MCS to pay a $200,000 civil money penalty and ensure that its contracts comply with EFTA/Regulation E and TILA/Regulation Z disclosure requirements. MCS must also hire an independent consultant “with specialized experience in consumer-finance compliance” and who is acceptable to the CFPB to review the company’s issuance and servicing of credit. The purpose of the review is to determine whether MCS has updated its contracts for compliance. The company must develop a compliance plan to correct any deficiencies identified by the consultant and provide the report and compliance plan to the CFPB for a determination of non-objection.