by Lauren E. Quigley
On December 16, 2013, the CFPB initiated its first action against an online loan servicer. CashCall, Inc. allegedly engaged in unfair, deceptive, and abusive practices. The CFPB investigation uncovered evidence that the company had violated either licensing requirements or interest-rate caps in at least eight states: Arizona, Arkansas, Colorado, Indiana, Massachusetts, New Hampshire, New York, and North Carolina. According to the CFPB, the loans included amounts ranging from $850 to $10,000, with annual interest rates between 90% and 343%. As a result of the violations, the loans were rendered void or nullified in whole or in part. In this case, a third-party lender allegedly made usurious loans and CashCall then undertook servicing and collecting on those void or nullified loans. Because the usurious loans were void or nullified, the CFPB alleged that CashCall was attempting to collect on a debt that borrowers did not owe. The goal of the action is to make CashCall refund money it received from void or nullified loans and pay additional damages and penalties.
In November, we wrote about the CFPB’s first action against a payday lender, Cash America International, Inc. While CashCall is not explicitly a payday lender, the CFPB acknowledges the similarities (and corresponding potential for consumer abuse) that online small-dollar and payday lenders share. This action is just another step in the CFPBs efforts to monitor and regulate the payday and online lending industry that has seen an increase in regulatory-evasion schemes.
Read more articles about the Consumer Financial Protection Bureau at Dykema’s CFPB Blog
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