The CFPB (Bureau) and the South Carolina Department of Consumer Affairs recently settled a case with two companies (and their owner) which brokered high-interest credit to veterans (as well as other consumers), which were based on the lender’s right to receive veterans’ pensions. The program was alleged to provide consumers with a lump-sum payment that would be repaid with high interest amounts and by assigning portions of their disability or pension payments. The case was originally filed in October 2019 and alleged that the individual and companies violated the Consumer Financial Protection Act and that they engaged in deceptive acts and practices.
The complaint alleged that these acts included misrepresenting that the contracts were valid and enforceable, but that the contracts assignment of veterans’ monthly pension or disability payments to investors actually violated federal law and South Carolina state law. Additionally, the Complaint alleged that defendants claimed that they were selling payments and not providing loans, but defendants required consumers to complete creditworthiness checks, had monthly withdrawals from the consumer’s bank account, among other characteristics that reflect that the product was similar to a loan. The complaint also alleged that defendants did not disclose the interest rates to the consumers.
In November 2020, the stipulated final judgment against defendants was approved by federal district court. Defendants are forbidden, permanently, from collecting money from any of the affected consumers, cannot disclose consumer information, and may not ever provide any consumer-financial products or services. The individual defendant, who was discharged from bankruptcy in May 2020, must pay a $500 civil money penalty to the Bureau and an additional $500 to the Department on South Carolina State Claims.