The Consumer Financial Protection Bureau (CFPB) just recently filed suit against four online lenders for allegedly collecting on consumer debts they were not legally owed.
The CFPB suit, filed in federal court, alleges that Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc. and Majestic Lake Financial, Inc. deceived customers by collecting on loans that were void under state laws governing interest rate caps or lender licensing.
“We allege that these companies made deceptive demands and illegally took money from people’s bank accounts,” said CFPB Director Richard Cordray. “We are seeking to stop these violations and get relief for consumers.”
Additionally, the CFPB looks to impose a penalty on the online lenders.
A CFPB investigation reportedly showed that high-interest loans offered by the four online lenders were void in at least 17 U.S. states. Loans in question ranged between $300 and $1,200 and came with annual interest rates ranging from 440 percent up to 950 percent, said the CFPB.
The suit alleges that the four online lenders violated the Truth in Lending Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The CFPB alleges the online lenders pursued consumers for payments on void loans, charged interest rates high enough to violate some state usury laws and did not obtain licenses to lend or collect in certain states.
Additionally, the online lenders are alleged to have made electronic withdrawals from bank accounts or otherwise demanded payment for debts and failed to disclose the real cost of credit.
Of course, the CFPB does not act without its own share of controversy. CFPB director Richard Cordray has more than once been accused of over-stepping his and the organization’s authority.
The current political administration is in the process of scrutinizing the organization and working to scale back or eliminate Dodd-Frank. The fate of the CFPB structure is slated to be decided on by the Washington full appellate court next month.