On November 15, the CFPB announced it had filed a complaint against a Texas-based service provider, alleging that it had assisted in the collection of loans that were, in whole or in part, void under state law. The complaint filed in the U.S. District Court for the District of Montana alleges that the service provider, which provided services to three tribal lending entities engaged in the business of extending online installment loans and lines of credit, along with two companies responsible for the collection process (collectively defendants), assisted in the collection of loans that consumers were not legally obligated to pay based on identified states’ usury laws or licensing requirements. Although the specific claims vary by defendant, the complaint alleges that the defendants engaged in deceptive, unfair, and abusive acts and practices in violation of the Consumer Financial Protection Act (CFPA) by:

  • misrepresenting that consumers were responsible for money owed on loans that were void in whole or in part, or did not exist, because the loans were void under state licensing or usury laws (voided loans);
  • demanding repayment from consumers on voided loans by issuing “demand letters,” electronically debiting funds from consumer bank accounts, and placing phone calls to consumers;
  • failing to disclose to consumers that defendants had no legal right to collect on certain voided loans and that consumers were not legally obligated to repay the loans;
  • causing injury to consumers by servicing and collecting on the voided loans;
  • taking advantage of consumers’ “lack of understanding” regarding the voided loans; and
  • providing assistance in, or administering, the origination and collection of the voided loans.

The CFPB is seeking monetary relief, civil money penalties, injunctive relief, and a prohibition of the service provider’s ability to commit future violations of the CFPA.