Earlier this week, the CFPB announced that it has filed its first enforcement action under the leadership of Acting Director Uejio. The lawsuit was filed in a Virginia federal district court jointly with the Attorneys General of Virginia, Massachusetts, and New York. The complaint names as defendants Libre by Nexus, Inc. (Libre), Libre’s parent company, and three individual owners of the parent company.
The lawsuit involves Libre’s activities directed at immigrants seeking to obtain bonds in order to be released from federal detention centers. The complaint alleges that “the vast majority of Libre’s clients are Spanish-speakers, most of whom do not read or write English and many of whom cannot read or write in any language.” As discussed below, the immigrants’ limited English proficiency is the basis of a claim by the CFPB that the defendants engaged in abusive conduct in violation of the CFPA’s UDAAP prohibition. In addition, in the Bureau’s press release about the action, Acting Director Uejio characterized the lawsuit as targeting racial inequity, an issue he has identified as a priority issue for the Bureau under his leadership. Acting Director Uejio called the case “a prime example of how people of color are targeted in financial scams and the latent inequity that is too often found in the market for financial products and services.” He stated that “[s]topping these kinds of cash-grab schemes is part of the Bureau’s commitment to addressing racial injustice in the market.”
The complaint alleges that Libre acted as an intermediary between the immigrants and the sureties and bond agents. In exchange for the immigrants entering into agreements with it, Libre agreed to indemnify the sureties and their bond agents for any losses in connection with the bonds. The agreements required consumers to pay large upfront fees plus a $420 monthly fee to rent GPS-tracking ankle monitors. The monitors were required to be worn until the consumer’s immigration case was resolved or the consumer made payments equal to a specified amount. In contrast to fully-paid bonds that are refundable when an immigration case is resolved, most fees paid to Libre were nonrefundable and resulted in consumers paying significantly more in nonrefundable fees to Libre than they would have paid for a refundable bond. Libre is alleged to have made representations that created the false impression that a consumer’s non-compliance with his or her agreement with Libre could lead to negative consequences in the consumer’s immigration case when in fact, no government agency was monitoring the consumer through the GPS monitors or requiring the consumer to use a GPS monitor to avoid incarceration.
The complaint alleges that Libre is a “covered person” under the CFPA because its transactions with consumers are “consumer financial products or services.” According to the complaint, the transactions are “consumer financial products or services” because Libre leads consumers to “reasonably believe that Libre offers or provides a credit transaction in which consumers incur a debt and defer the right to repay.” More specifically, consumers are allegedly led to believe “that Libre has paid cash bonds, that consumers owe a debt to Libre in the amount of the cash bonds, and that monthly payments pay down that debt.”
The complaint alleges that Libre engaged in abusive acts or practices in violation of the CFPA’s UDAAP prohibition by using “predominantly English-language agreements to enroll clients. According to the complaint, Libre (1) knew that many of its clients and co-signers did not understand English and that some could not read in any language, and (2) rushed through the enrollment process and omitted or misrepresented material terms of its written agreement to clients and co-signers before they were enrolled. As a result, Libre is alleged to have “materially interfered with consumers’ ability to understand the terms and conditions of Libre’s offers of credit.” The individual defendants are also alleged to have violated the CFP by engaging in these abusive acts or practices.
The complaint also alleges that Libre and the individual defendants engaged in deceptive acts or practices in violation of the CFPA’s UDAAP prohibition through conduct that included the following:
- Falsely representing that it had paid consumers’ bonds and that consumers’ monthly payments went to repaying the bonds
- Falsely threatening consumers with detention or deportation if they failed to make monthly payments or removed the GPS monitors
- Threatening consumers that their accounts would be turned over to a debt buyer or collection agency when in fact Libre has never sold a debt or referred a debt to a collection agency
- Threatening consumers that failing to make payments to Libre could harm their credit when in fact Libre does not furnish information to consumer reporting agencies
- Threatening to sue consumers for non-payment when in fact Libre has never filed a collection lawsuit
The complaint includes a claim that the other defendants also violated the CFPA by providing substantial assistance to Libre’s deceptive and abusive acts or practices. It also includes claims that the defendants violated the Virginia Consumer Protection Act, the Massachusetts Consumer Protection Law, the Massachusetts Fair Debt Collection Practices Act, the New York Executive Law and the New York General Business Law. The relief sought by the complaint include restitution, disgorgement for unjust enrichment, civil penalties under the CFPA, and civil penalties under Virginia, Massachusetts, New York law.