On February 7, 2017, the CFPB and New York Attorney General filed a Complaint alleging UDAAP violations against a company, two related entities, and the companies’ owner, engaged in the business of offering to advance funds to consumers entitled to receive compensation under a settlement fund or judgment. The Complaint, filed in the U.S. District Court for the Southern District of New York, alleges that the defendants violated several laws, including the Dodd-Frank Act’s prohibition on deceptive and abusive acts and practices.
The Complaint asserts that the defendants contacted these consumers after they were awarded their money but before they received most of it. The defendants offered the consumers a “deal,” whereby the defendants would provide an upfront payment of some of the money a consumer had not yet received in exchange for the consumer’s agreement to pay the defendants back when they received the balance of the payout. The Complaint contends, however, that the defendants used confusing contracts that misrepresented the consumer’s repayment obligations and charged unlawfully high interest rates, often resulting in the defendants collecting from the consumers more than twice the amount of the advance.
The Complaint alleges (along with violations of New York state law) that the defendants engaged in UDAAP violations by: (1) luring consumers into costly payouts by lying about the terms of the deal; (2) lying about speeding up the processing of consumers’ claims; (3) deceiving consumers about when they would receive the money from the defendants; and (4) illegally collecting money from consumers. The Complaint requests that the Court enjoin the defendants from committing future violations, grant relief for the victims, and impose penalties on the defendants.
On January 4, 2017 (prior to the filing of the CFPB’s Complaint), one of the defendants in this suit had filed its own complaint against the CFPB in the same court, in response to a Civil Investigative Demand issued by the CFPB, seeking declaratory and injunctive relief. The company argued that the CFPB’s investigation exceeded the scope of its regulatory authority and that the CFPB violated the Company’s First Amendment rights by retaliating against it for challenging the CFPB’s jurisdiction.
A copy of the CFPB’s Complaint can be viewed here: http://files.consumerfinance.gov/f/documents/201702_cfpb_RD-Legal-complaint.pdf.