The Federal Trade Commission announced on Monday (April 15) a $3.85 million settlement with online lender Avant over a lawsuit alleging the firm lied to customers and used other illegal tactics.
Specifically, the FTC said Avant “advertised that it would take payments by credit or debit cards when, in many cases, it wouldn’t; illegally required customers to agree to automatic payments from their bank accounts; deceived customers about the amount needed to pay off their loans; collected — or tried to collect — more money from people who paid the quoted payoff amount; and made unauthorized charges on customers’ bank accounts.”
The FTC clarified in a further post: “The company also claimed that people could pay their loans off early without penalty, but some consumers reported receiving the run-around. Because Avant charges daily simple interest on its loans, it’s not easy for consumers to calculate down to the penny the amount of their final payout because it will depend on the exact date they make the payment.”
Because the payoff terms were so difficult to understand, “consumers called Avant or contacted them by email or through Avant’s online tool for their calculated payoff amount. But even when consumers got an email or verbal confirmation from Avant that their loan was paid off, the company came back for more — sometimes months later — claiming the payoff quote was erroneous,” the FTC said. “Avant dinged consumers for extra fees and interest and even reported to credit bureaus that loans were delinquent after consumers paid the quoted payoff amount.”
Under terms of the settlement, Avant cannot engage in any similar conduct, and must pay $3.85 million to the thousands of customers who were harmed by its practices.
“We have alleged that Avant gave the run-around to consumers trying to repay their loans, because of systemic issues with the company’s loan servicing platform,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “Online lenders need to understand that loan servicing is just as important to consumers as loan marketing and origination, and we will not hesitate to hold lenders liable for unfair or deceptive servicing practices.”