The CFPB announced earlier this week that it has issued a consent order against GreenSky, LLC that finds GreenSky engaged in unfair acts and practices in connection with its origination and servicing activities related to its point-of-sale financing program.  The consent order requires GreenSky to refund or cancel up to $9 million in point-of-sale loans and pay a $2.5 million civil penalty.

GreenSky partners with banks to offer a consumer financing and payments program in which GreenSky provides point-of-sale financial technology and payments technology, and performs origination and servicing activities.  Merchants who participate in GreenSky’s program market it to consumers and take loan applications at the point-of-sale.  Merchants generally submit loan applications online on behalf of consumers using GreenSky’s website or mobile app.  When a loan application is approved, the loan terms are displayed on a computer or tablet at the conclusion of the application process but can only be viewed by the consumer if the merchant shares the screen with the consumer.

Until at least April 2019, GreenSky sent loan documents to approved applicants but did not require consumers to sign and return the loan documents to consummate a loan.  GreenSky also issued a “shopping pass” number to consumers that functioned like a credit card and treated acceptance of the shopping pass or associated funds as acceptance of the loan.  To pay for a product or service, a consumer provided the shopping pass number to the merchant who then used the shopping pass to apply for payment from GreenSky.  GreenSky thereafter disbursed the loan proceeds directly to the merchant.

In the consent order, the CFPB found that merchants sometimes applied for a loan without a consumer’s knowledge and entered their own email addresses as the consumer’s address on the loan application.  As a result, GreenSky sent the loan documents or shopping pass to the merchant instead of the consumer.  The CFPB found that in other instances, merchants applied for loans without a consumer’s knowledge and, although the merchant entered the consumer’s correct address, the consumer ignored the loan documents because the consumer was unaware of the loan.

The CFPB found that GreenSky engaged in unfair acts or practices in violation of the CFPA by performing engaging in origination and servicing activities for loans consumers had not authorized and by structuring its origination and servicing practices in a manner that enabled unauthorized loans.  The deficiencies cited by the CFPB included a lack of appropriate and effective merchant training and oversight and ineffective management of the complaint resolution practices.

In addition to requiring payment of a $2.5 million civil money penalty and consumer redress in the form of cash redress and loan cancellations, the consent order requires GreenSky to take various steps to prevent the practices found to be unfair, including obtaining evidence of a consumer’s authorization before disbursing a loan, implementing an effective complaint management program, and improving its training and oversight of merchants.

We believe that this consent order carries important implications for point-of-sale financing programs where a merchant plays a significant role in the loan application and origination process.  The CFPB’s findings underscore the need for careful controls and monitoring of merchants under these circumstances, whether the financing is for in-person or online shopping.