On May 17, the CFPB filed a lawsuit against a California-based fintech that operates a nationwide website and mobile-application based peer-to-peer lending platform through which consumers can obtain small-dollar, short-term loans. The Bureau alleges that while the company markets itself as offering 0% APR loans, its use of dark patterns ensures that almost every borrower pays a fee, in the form of a “tip” or “donation.”  The Bureau alleges that the company violated the Consumer Financial Protection Act’s prohibition against unfair, deceptive, and abusive conduct, as well as the Fair ..read more

On May 3, a California resident filed a class action lawsuit in federal court accusing a Los Angeles-based credit union of discriminatory practices, and raised a civil rights claim under 42 U.S.C. § 1981, and violations of the California’s Unruh Civil Rights Act. In the complaint, the plaintiff alleges his automobile loan application was unfairly denied because of his immigration status as a Deferred Action for Childhood Arrivals (DACA) recipient. DACA, a federal immigration program, provides temporary work permits and protection from deportation for certain undocumented immigrants who ar ..read more

On May 16, the United States Supreme Court, in a 7-2 ruling, held that the CFPB’s funding mechanism does not violate the Appropriations Clause of the U.S. Constitution. As we previously discussed in greater detail here, under the Dodd-Frank Act, Congress provided a standing source of funding for the CFPB outside the ordinary annual appropriations process—the Bureau draws from the Federal Reserve System an amount determined by its Director, subject only to an inflation-adjusted cap. Plaintiffs had argued the structure violated the Appropriation’s Clause as it did not go through an annual a ..read more

On March 28, the FDIC released the spring edition of its consumer compliance supervisory highlights. The FDIC supervises approximately 3,000 state-chartered banks and thrifts that are not members of the Federal Reserve System. Most of these institutions are community banks that provide credit and services locally. Like the CFPB, the FDIC conducts supervisory activities, including examinations, to review institutions’ compliance management systems. Its examination focuses on identifying the greatest potential risk of harm to consumers, based on the business model and products offered by a ..read more

On May 9, the CFPB issued a new report highlighting the issues consumers encounter with credit card rewards programs. The report was released in conjunction with a hearing co-hosted with the Department of Transportation and featured remarks from Director Chopra and Secretary of Transportation Pete Buttigieg, along with panelists from consumer groups, policy advocacy organizations, financial institutions, and airlines. Chopra, in particular, noted the lack of transparency in the rewards market and how many card issuers engage in bait-and-switch scams. As described in further detail in the ..read more

On May 6, 2024, the CFPB resolved an enforcement action against a group of Delaware student loan trusts and a loan servicer (found here and here) for their failures to adequately respond to borrowers’ requests for relief, including during the COVID-19 pandemic. When entered by the court, the stipulated final judgments will require defendants to pay almost $3 million in redress to borrowers, and pay a fine of $2.15 million. The trusts acquired, pooled, and securitized student loans, and hired a third party servicer to service them. As of February 2024, the trusts held roughly 163,000 individual ..read more

On April 25, the FTC took action against a Washington-based bill payment company and its two co-founders alleging that the company used misleading search ads to impersonate consumers’ billers and deceptive design practices to mislead those consumers into paying “junk fees” they tacked on to consumers’ bills.  In a complaint filed in the Western District of Washington, the FTC alleged that the company employed misleading “dark pattens” to manipulate consumers into using their platform under the mistaken belief that they had reached their biller’s official payment site. Once on the false si ..read more

On May 1, the FTC announced a settlement in federal court in the Northern District of Georgia against a payment processing company, along with its former CEO and senior vice president, for the company’s role in handling transactions for a debt-relief company engaging in fraud. The defendants have agreed to a settlement that includes a $10 million payment to compensate affected consumers and tighter restrictions on future business operations. According to the FTC’s complaint, the company processed payments for a debt-relief company previously sued for fraud, despite “substantial” evidence ..read more

In an April 16 unpublished opinion, the U.S. Ninth Circuit Court of Appeals affirmed the Bankruptcy Appellate Panel’s earlier decision finding that a mortgage lender not licensed in California violated the state’s usury law when it extended the term of the loan and lowered the borrower’s interest rate on a broker-arranged mortgage loan that it owned.  The original loan had been exempt from California’s usury law under an exception in California Civil Code section 1916.1 that allows lenders not licensed in the state to provide loans in California that are not subject to the usury law if th ..read more

On April 22, the Governor of Tennessee signed HB 2100 into law. This new law, an amendment to the state’s consumer protection codes, introduces protections for consumers against discrimination by financial institutions and insurers in their service offerings. Under HB 2100, financial institutions and insurers are expressly prohibited from basing the provision or denial of services on: a person’s political views, speech, or affiliations; a person’s religious convictions, practices, or affiliations; any factor if it is not a “quantitative, impartial, and risk-based standard, including any such ..read more