On September 11, the Consumer Financial Protection Bureau (CFPB) announced that it issued a consent order against Tempoe, LLC, a nonbank consumer finance company, for alleged violations of the Consumer Financial Protection Act (CFPA), Consumer Leasing Act, and Regulation M. That same day, it was announced that Tempoe also entered into a parallel settlement with 41 states and the District of Columbia resolving a multi-state investigation into the same alleged misconduct. Under the terms of the CFPB consent order, Tempoe was banned from consumer leasing activity and must pay $1 million to the CFPB and $1 million to the states and jurisdictions participating in the settlement.
Tempoe’s business model involved purchasing property from retailers and then leasing it to consumers who were typically unable to obtain conventional financing to purchase the property outright. Consumers who entered into the lease agreements made periodic payments for five months, after which they had the option to continue the lease agreement for the full term of the contract, return the property, or purchase the property for an additional fee.
According to the CFPB, Tempoe engaged in unfair acts or practices in violation of the CFPA by concealing the terms of its lease agreements from consumers in several ways. Specifically, the CFPB alleged that Tempoe encouraged its employees to avoid calling the financial product a “lease.” Tempoe’s marketing materials allegedly failed to reference certain material terms of the agreement and “buried” references to the agreements as a lease in the fine print. Further, some consumers allegedly did not receive a copy of their lease agreement until after the transaction was completed while others received oral descriptions of the agreement from retailers’ employees but never received an actual copy. As a result, the CFPB claims that some consumers did not learn until the end of the initial agreement that they did not own the item leased.
The CFPB also alleged that Tempoe violated the CFPA by maintaining unreasonable return policies. Consumers who wanted to cancel their lease agreement after the first 30 days, but within the initial five-month term, were required to return the product to Tempoe. However, Tempoe purportedly did not accept returns of many items, including certain large items, ancillary labor and services, and property that cost less than approximately $300. This policy resulted in consumers having to continue the lease or exercise the purchase option.
The CFPB further alleged that Tempoe violated the Consumer Leasing Act and Regulation M by failing to provide required disclosures to consumers who continued leasing on a month-to-month basis for more than six months after the initial term.
Under the terms of the consent order, Tempoe agreed to:
- Permanently cease leasing activities.
- Release consumers from existing lease agreements, including from payments owed, which total approximately $33.6 million in outstanding balances.
- Permit consumers to retain the leased products with no further financial obligation.
- Pay $1 million to the CFPB’s victim’s relief fund and $1 million to the states and jurisdictions participating in the settlement.