Making the most of its enforcement powers before the new administration takes over, and likely concerned that its days as a stand-alone bureau may be coming to an end, the Consumer Financial Protection Bureau (CFPB) took action against entities ranging from Virginia pawnbrokers to national lender Moneytree, Inc. to two of the nation's largest credit bureaus, while still finding time to launch a new tool to monitor developments in consumer lending.

What happened

In December, the CFPB filed four complaints in Virginia federal court against Spotsylvania Gold & Pawn, Inc., Fredericksburg Pawn, Inc., Pawn U.S.A., Inc., and A to Z Pawn, Inc. The CFPB claims that all four defendants violated the Truth in Lending Act as well as the Dodd-Frank Wall Street Reform and Consumer Protection Act's ban on unfair, deceptive, or abusive acts or practices by misstating the charges associated with pawn loans.

The defendants, say the CFPB, disclosed only a low annual percentage rate (APR) that did not reflect a host of other fees added on to the loans, such as "appraisal," "interest," "storage," or "setup," in some cases understating the true annual percentage by half of the actual cost.

Each of the suits requests a halt to the allegedly illegal practices as well as penalties and restitution for the thousands of impacted consumers.

"When consumers take out a loan, they are entitled to know the actual cost," CFPB Director Richard Cordray said in a statement. "We are taking action … against pawnbrokers that deceived consumers about these costs, and we will work to make sure they stop violating the law and provide relief for consumers who were wronged."

In another enforcement action, the CFPB filed an administrative complaint against Moneytree, Inc., a Washington-based financial services company offering payday loans and check cashing, among other services, challenging the company's online advertisements and collection letters as deceptive. Advertisements for the company's check-cashing services tricked consumers about the true cost, the CFPB asserted, with an ad in early 2015 offering to cash consumers' tax refund checks for "1.99." The actual fee was 1.99 percent of the amount of the check cashed, not $1.99, despite what the ad implied, the Bureau said.

The CFPB alleges that consumers were also misled by letters sent from late 2014 through early 2015 indicating that their vehicles could be repossessed if they failed to make past-due payments on their installment loans—even though none of the consumers had loans secured by the vehicles. Moneytree further allegedly violated federal law by making unauthorized electronic transfers from consumers' bank accounts more than 700 times.

The complaint was supposedly triggered by multiple supervisory examinations during which the CFPB identified what it characterized as "significant weaknesses" in the company's compliance-management systems with regard to lending, marketing, and collections activities.

The CFPB ordered Moneytree to pay $255,000 in redress to consumers who allegedly: (1) paid more than the company advertised for its check-cashing service, (2) received one or more of the deceptive collection letters, or (3) were charged fees by financial institutions when Moneytree withdrew electronic fund payments without proper authorization.

In addition, the company must cease its deceptive practices and obtain proper authorization for any electronic fund transfers, as well as pay a $250,000 civil penalty.

A third CFPB action resulted from a three-year investigation into allegations that two of the three major credit bureaus duped consumers about the usefulness and actual cost of credit scores. The CFPB claims that both companies likewise made false promises about credit-related products to enroll consumers in recurring monthly fees. The credit bureaus will pay $23.5 million to settle the charges.

As our readers know, credit reporting agencies collect credit information (including a borrower's debt load, payment history, and maximum credit limits) to generate credit reports and scores. The companies also market, sell, and provide credit-related products directly to consumers, such as credit monitoring.

One of these companies utilized a scoring model from a third party vendor while the other sold consumers scores based on its proprietary model. But, says the CFPB, neither score was typically used for credit decisions even though both companies allegedly marketed them as serving that purpose. The CFPB claims that the two companies ran afoul of Dodd-Frank by falsely representing that the credit scores marketed and sold to consumers were in fact the same scores lenders used to make credit decisions.

In addition, both companies allegedly tricked consumers by claiming that their credit scores and credit-related products were free or nearly free. But while consumers received a free trial lasting seven or 30 days, they were then enrolled, says the CFPB, in a subscription plan that included a recurring monthly fee. The CFPB alleges that the use of the negative option billing structure was not clearly and conspicuously disclosed to consumers.

Pursuant to consent orders, the credit bureaus must pay a total of $17.6 million in restitution to consumers, with one entity contributing $13.9 million and the other on the hook for about $3.8 million. Civil penalties will cost a total of $5.5 million.

Going forward, the CFPB has ordered both companies to represent more accurately the usefulness of the credit scores they sell, obtain the express informed consent of consumers before enrolling them in any credit-related product with a negative option feature, and provide consumers with a simple, easy-to-understand way to cancel the purchase of credit-related products.

Industry Tool—Finally, taking a break from enforcement efforts, the CFPB released a new tool that the agency says will allow both industry and consumers to monitor developments in consumer lending and forecast potential future risks.

The web-based Consumer Credit Trends currently covers the mortgage, credit card, auto loan, and student loan markets and will "help us identify and act on trends that warn of another crisis or show that credit is too constricted," Bureau Director Richard Cordray explained. The CFPB intends to add other consumer credit products and information on credit applications, delinquency rates, and consumer debt levels.

For example, the first release from the tool noted a "sharp uptick" in mortgage originations from August to October (up almost 50 percent over the same period in 2015) as well as growth in credit card lending to lower-income consumers (an increase of about 14.2 percent over the prior year), with a slowdown of new student loans (a reduction of 1.3 percent) and fewer auto loans to borrowers with lower credit scores (a decrease of 0.5 percent).

Information will be updated on a regular basis, the CFPB said, with analyses on "notable findings" as warranted and providing "a starting point for deeper analysis" by the CFPB and others.

To read the complaints against the Virginia pawnbrokers, click here.

To read the consent order in In the Matter of Moneytree, Inc., click here.

To read the consent orders in the actions against the credit bureaus, click here.

To access the Consumer Credit Trends tool, click here.

Why it matters

This could be the last we hear from the CFPB not related to its reinvention by the new administration and Congress. The CFPB wasted no time in the final weeks of the Obama presidency with several enforcement actions and the launch of its new Consumer Credit Trends tool.