The CFPB announced last week that it has entered into a proposed settlement with Driver Loan, LLC (“Driver Loan”) and its Chief Executive Officer to settle the November 2020 lawsuit it filed against Driver Loan and its CEO alleging the defendants engaged in deceptive acts and practices in violation of the Dodd-Frank Act’s UDAAP prohibition in connection with taking deposits from and making loans to consumers.
In its complaint filed in a Florida federal district court, the CFPB alleged that since 2017, Driver Loan offered small-dollar, short- term, high-interest rate loans to consumers. It also alleged that in 2020, Driver Loan began taking deposits from consumers to fund its loans. The CFPB alleged that the defendants engaged in deceptive practices by:
- Falsely representing that consumers’ deposits were held at FDIC-insured institutions and would have a guaranteed rate of return.
- Marketing its loans as having an APR of 440% when the actual APRs were over 900%.
An act or practice is deemed deceptive in violation of the UDAAP prohibition if there is a material representation or omission of information that is likely to mislead consumers acting reasonably under the circumstances. In support of its claim that that the defendants’ false representations regarding the deposit accounts were deceptive, the Bureau alleged that a consumer acting reasonably under the circumstances would believe that Driver Loan was offering a safe product. According to the Bureau, because the interest rates that Driver Loan charged were usurious under Florida criminal law, the defendants created a substantial risk that Driver Loan would not be able to collect delinquent loans or meet its obligations to consumers who sought to withdraw deposited funds.
The Proposed Stipulated Final Judgment and Order would require the defendants to refund about $1 million in deposits to consumers and pay a civil money penalty of $100,000. It would also permanently ban the defendants from engaging in deposit-taking activity and from making deceptive statements to consumers.