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The Consumer Financial Protection Bureau (CFPB) and SettleIt, Inc., an online debt-settlement company, have agreed to settle “abusiveness” claims for $1.4 million.

In an April 13 complaint filed in a California federal court, the CFPB detailed SettleIt’s business practices and alleged SettleIt concealed information from its customers. SettleIt negotiates with creditors to reduce and settle consumers’ debts. Customers seeking debt help sign an agreement with SettleIt, and SettleIt promises to advocate for the customers and relieve their debts.

The CFPB alleged SettleIt routinely conceals three things from its customers:

  1. SettleIt buries its fee — a whopping 25% of the debt customers ask SettleIt to handle — in a 19-page customer contract. In some cases, SettleIt also charges the fee before a customer has approved a debt settlement.
  1. SettleIt tells its customers it is “not owned or operated by any of your creditors,” but the same individual who owns SettleIt owns two consumer lenders — CashCall, Inc. and LoanMe, Inc. SettleIt settles debts for consumers with CashCall and LoanMe, and does so at higher rates than debts owed to other lenders.
  1. SettleIt encourages its customers to stop borrowing money, while also marketing loans to them. These “Fresh Start” loans come from various lenders, including CashCall and LoanMe, whose loans have a 24% APR. The loans are used to pay SettleIt’s fee, resulting in customers paying interest on the loans to pay SettleIt. SettleIt does not disclose its relationship with CashCall and LoanMe to its customers.

Based on these allegations, the CFPB lodged four claims against SettleIt. One claim is an alleged violation of the Dodd-Frank Act’s prohibition on “unfair, deceptive, or abusive acts or practices,” known as UDAAP. See 12 U.S.C. § 5531(a). Specifically, the CFPB asserted SettleIt engaged in “abusive””practices by taking “unreasonable advantage of consumers’ reasonable reliance that SettleIt would protect their interests in negotiating their debts by engaging in a form of self-dealing that benefitted SettleIt, CashCall, and LoanMe at consumers’ expense.”

The day after the complaint was filed, the parties filed a stipulated settlement. Without admitting the CFPB’s allegations, SettleIt agreed to stop settling debts owed to CashCall and LoanMe and clearly disclose its fees and only charge them after customer authorization. SettleIt also agreed to repay consumers $647,000 for fees received for settling CashCall or LoanMe debts and to pay the CFPB a $750,000 fine.

The SettleIt case represents an important step in the CFPB filing targeted “abusiveness” allegations. As we recently reported, the CFPB under President Biden rescinded the Trump-era policy statement limiting the “abusive acts and practices” standard of the 2010 Dodd-Frank Act. That policy statement indicated the CFPB would avoid filing duplicative claims against companies arising under more than one of the Dodd-Frank Act’s UDAAP standards targeting “unfair,” “deceptive,” and “abusive” acts and practices.

While the CFPB has walked back that limitation under President Biden, allowing the agency to file multiple claims based on the same practices, the SettleIt case reveals that the CFPB is taking a new interest in “abusive” claims in their own right.

The SettleIt suit, like the CFPB’s recent suit against immigration bond company Libre, signals a new wave of aggressive enforcement of the UDAAP standards. Previously muddled with allegations of “unfair” and “deceptive” practices, allegations of singularly “abusive” acts seem to be more commonplace under the new CFPB leadership. We will continue to monitor this development.

On April 6, the Consumer Financial Protection Bureau (CFPB) issued a consent order against California-based debt collector Yorba Capital Management LLC and its sole owner Daniel Portilla, Jr. for violating the Consumer Financial Protection Act and the Fair Debt Collection Practices Act. The consent order permanently bans Yorba and Portilla from the debt collection business and orders restitution and penalties to resolve the findings of the CFPB.

The consent order states Yorba and Portilla allegedly harassed consumers from January 2017 until April 2020 by threatening legal action. Specifically, it states Yorba attempted to collect debts through mailing letters titled “LITIGATION NOTICE” that contained a case number and caption, giving the incorrect impression that Yorba had already filed a lawsuit. The letters stated: “You are hereby notified that a recommendation to file a lawsuit to collect this debt may be the next step resulting in a judgment entered against you,” and “to avoid any further legal action, you need to contact our office within 10 days of this notice; otherwise, we will assume you do not intend to pay this debt and litigation will be commenced immediately.” The letters further warned that Yorba had “several methods to collect a judgment” once a judgment was entered, including wage garnishment, levy on bank accounts, placement of liens on real or personal property, and suspension of the consumer’s driver’s license. If consumers contacted Yorba, they were provided scarce information regarding their debts before being verbally threatened with a lawsuit unless the debt was paid.

Contrary to the verbal and written warnings, the consent order states Yorba and Portilla did not actually file lawsuits against those consumers or even hire attorneys. The CFPB thus determined the letters misled and falsely threatened legal action against consumers in violation of the CFPA, 15 U.S.C. §§ 5531(a) and 5536(a)(1)(B), and the FDCPA, 15 U.S.C. §§ 1692e(5) and 1692e(10).

Yorba and Portilla are now permanently banned from the debt collection business. The consent order includes an $860,000 suspended judgment for consumer redress, which is currently suspended due to their inability to pay. They must also pay an additional $2,200 civil money penalty to the CFPB. Yorba and Portilla agreed to the settlement without admitting or denying the CFPB’s findings in the consent order.

The CFPB’s most recent similar action against collectors using false threats to collect debts was in 2019. The CFPB partnered with the New York attorney general to file a consent order that barred Douglas MacKinnon, Mark Gray, and their companies Northern Resolution Group LLC and Delray Capital LLC from the debt collection business. That consent order stated those businesses and individuals falsely threatened consumers with legal action that they had no intention of taking, falsely accusing consumers of committing crimes, and falsely claiming consumers would be arrested, all in an effort to pressure consumers to pay debts.

The consent order against Yorba and Portilla is the first administrative settlement finalized under CFPB Acting Director David Uejio. We will continue to monitor and report on any development related to this case.

On March 31, the Consumer Financial Protection Bureau (CFPB or Bureau) announced it is rescinding its April 1, 2020 policy statement regarding the Fair Credit Reporting Act (FCRA) and Regulation V following the enactment of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This recission is effective April 1.

Background

On March 27, 2020, President Trump signed the CARES Act into law. Among other provisions, the CARES Act amended the FCRA to require businesses furnishing consumer credit information to consumer reporting agencies (CRAs) to report as “current” any account for which a consumer is performing pursuant to a COVID-19-related deferral, partial payment, or forbearance agreement — including missing one or more payments as agreed. The special reporting period started January 31, 2020 and will end 120 days from the later of the enactment of the CARES Act or the end of the national state of emergency — meaning at present there is no end date.

Recognizing the logistical difficulties presented by these obligations during the pandemic, the CFPB issued a “non-binding general” policy statement on April 1, 2020, stating it would not enforce the FCRA’s statutory investigation timeframe against furnishers or consumer reporting agencies acting in good faith. The April 1, 2020 policy statement emphasized that a CRA’s or furnisher’s investigative dispute period would be extended from 30 to 45 days if a consumer provided additional information relevant to an investigation. Additionally, the CFPB encouraged furnishers and CRAs to alleviate operation stress by not investigating “disputes submitted by credit repair organizations and disputes they reasonably determine to be frivolous or irrelevant.”

The CFPB maintained its April 1, 2020 guidance despite initial push back from state attorneys general and calls from consumer advocacy groups later in the year.

Recission of April 1, 2020 Guidance

In the press release announcing recission of the April 1, 2020 guidance, CFPB Acting Director Dave Uejio stated, “Providing regulatory flexibility to companies should not come at the expense of consumers. Because many financial institutions have developed more robust remote capabilities and demonstrated improved operations, it is no longer prudent to maintain these flexibilities. The CFPB’s first priority, today and always, is protecting consumers from harm.”

The recission, available here, states the CFPB’s April 2020 guidance “expressed the Bureau’s recognition of the impact of the COVID-19 pandemic on the operations of many consumer reporting agencies and furnishers.” But the Bureau believes recission is now appropriate as “consumer reporting agencies and furnishers have had sufficient time to adapt to the pandemic and should be able to regularly meet their obligations under the FCRA and Regulation V.”

Addressing concerns that one day’s notice was not a significant heads-up to companies regarding the policy shift, the recission states, “because the [April 1, 2020 guidance] did not create binding legal obligations on the Bureau or create or confer any substantive rights on external parties, it did not create any reasonable reliance interests for industry participants.”

Notably, the recission does not apply to the section of the April 2020 guidance titled, “Furnishing Consumer Information Impacted by COVID-19.” That unaffected section encourages furnishers “to continue furnishing information despite the current crisis,” while also supporting “furnishers’ voluntary efforts to provide payment relief.” The section also states the CFPB “does not intend to cite in examinations or take enforcement actions those who furnish information to consumer reporting agencies that accurately reflects the payment relief measures they are employing.”

Takeaways

Companies providing consumer financial services have been anticipating a more aggressive CFPB under President Biden. On January 18, then President-elect Joe Biden announced he would nominate current Federal Trade Commission (FTC) Commissioner Rohit Chopra as the next director of the CFPB. Last week, the CFPB signaled its enforcement priorities in its Consumer Response 2020 Annual Report to Congress.

Furnishers and CRAs can continue to expect a more robust presence from the CFPB and should immediately re-evaluate their compliance management systems to minimize risk.

On March 22, the Consumer Financial Protection Bureau (Bureau) moved to dismiss a challenge to a final rule it promulgated last summer. But this routine filing was followed by a blog that expressed the Bureau’s intent to address the challenged rule outside of court and clarified that its “brief address[es] only the court’s jurisdiction to hear the case” and “does not address the merits of the underlying rule.”

The challenged rule revoked a 2017 rule that imposed mandatory underwriting provisions on payday lenders. Specifically, the 2017 rule required lenders to reasonably assess a borrower’s ability to repay the loan on its terms and barred lenders from attempting to withdraw from a borrower’s account after two such attempts had failed due to lack of sufficient funds. The 2020 revocation became effective on October 20, 2020, before the 2017 rule had gone into effect. Nine days later, the National Association for Latino Community Asset Builders (NALCAB) challenged the revocation, alleging it was arbitrary and capricious and did not observe rulemaking requirements.

The Bureau’s motion argued NALCAB lacks standing to sue — on its own or on behalf of its members — because its allegations are speculative and abstract. The next day, however, Acting Director Dave Uejio penned a blog insisting the Bureau’s motion merely fulfilled its “legal obligation” to respond to NALCAB’s complaint. Further, “the Bureau’s filing should not be regarded as an indication that the Bureau is satisfied with the status quo in [the payday lending] market” and “the Bureau believes that the harms identified by the 2017 rule still exist.”

Even if the Bureau’s public insistence that duty alone prompted its motion to dismiss is dubious (regardless of its composition and ideology, the Bureau clearly benefits from avoiding a judgment that one of its rules is arbitrary and capricious or that it was illegally promulgated), Acting Director Uejio’s statement sends a strong signal that the Bureau intends to reinstitute the 2017 rule, but on its own terms rather than a court’s.

If and when it does, payday lenders will face a legal environment in which it is “unfair” and “abusive” to make loans without reasonably determining the borrower’s ability to repay. Assuming Acting Director Uejio is correct that “the vast majority of [the] industry’s revenue [comes] from consumers who could not afford to repay their loans,” this could institute a sea change in the payday lending market and generate considerable litigation.

The district court case is National Association for Latino Community Asset Builders v. CFPB, No. 1:20-cv-03122-APM (D.D.C.).

On March 24, the Consumer Financial Protection Bureau (CFPB) provided the Consumer Response 2020 Annual Report (CFPB Report) to Congress. The CFPB Report reflects complaints submitted by consumers to the CFPB and analyzes those complaints.

In 2020, the CFPB saw a 54% rise in complaints from 2019 — with the total number increasing from 352,400 in 2019 to 542,300 in 2020. The CFPB attributes the rise in complaints, at least in part, to the impact of the novel coronavirus (COVID-19) in the consumer financial marketplace with CFPB Acting Director Dave Ueijo stating, “The pandemic has been among the most disruptive long-term events we will see in our lifetimes. Not surprisingly, the shockwaves it sent across the planet were felt deeply in the consumer financial marketplace.”

Key takeaways from the CFPB Report include:

  • Credit and consumer reporting received the largest portion of consumer complaints, accounting for 58% of total complaints;
  • Debt collection was the second highest area of consumer complaints, totaling 15% of complaints;
  • Per capita, Florida consumers submitted more complaints than any other state, with 309 complaints submitted per 100,000 people;
  • Self-identified servicemembers, veterans, and military families submitted 40,800 complaints, accounting for approximately 7.5% of complaints; and
  • While only 5.9% of complaints explicitly mentioned COVID-19, the CFPB emphasized that “absence of coronavirus as a keyword in a complaint does not necessarily mean the complaint was not related to the financial impact of the pandemic.”

In a press release, the CFPB noted that complaints about inaccurate information on credit and consumer reports rose from the prior year. The CFPB also emphasized that “in prior years” credit reporting agencies “provided substantive and comparatively detailed responses to the majority of complaints.” However, in a potential shot across the bow, the CFPB “observed” that agencies “stopped providing complete and accurate responses to many of these complaints” in 2020.

At the onset of the pandemic, the CFPB signaled regulatory relief in an April 1, 2020 policy statement about operational challenges posed by COVID-19, stating it “will consider a consumer reporting agency’s or furnisher’s individual circumstances” when conducting an examination for compliance with the FCRA. Companies providing consumer financial services now, however, can expect a more aggressive CFPB with President Biden’s nomination of Rohit Chopra to serve as the agency’s new director.

On March 3, the Consumer Financial Protection Bureau (CFPB) filed a complaint in the Northern District of Illinois against a third-party payment processor, BrightSpeed Solutions, Inc., and its founder and former CEO Kevin Howard. The CFPB’s complaint alleges that the defendants violated the Consumer Financial Protection Act (CFPA) and the Telemarketing and Consumer Fraud and Abuse Prevention Act and its implementing rule, the Telemarketing Sales Rule (TSR).

BrightSpeed processed remotely created check payments (RCCs) for entities that telemarketed antivirus software and technical support services. An RCC is typically created when the holder of a checking account authorizes a payee to draw a check on the account but does not actually sign the check.

The complaint alleges from 2016 to 2018, BrightSpeed processed RCC payments for over 100 merchant-clients who purported to provide valuable virus software and technical support services, but who instead scammed consumers into purchasing unnecessary and over-priced computer software. The merchant-clients utilized pop-up advertisements stating that a consumer’s computer was running slowly or infected with a virus and for the consumer to call a number for assistance. Upon calling, the merchant-clients would offer antivirus software or technical support services that were sometimes available for free or little to no cost to the public. However, the merchant-clients were charging up to $2,000 for these services. The merchant-clients would have a consumer verbally authorize an RCC and provide his/her name, address, bank account number, and bank routing number.

Nearly 1,000 consumers lodged complaints about the service, with many of those complaints submitted to BrightSpeed along with a request for a refund. The originating banks that processed the RCCs also expressed concerns to BrightSpeed. The complaint also alleges that BrightSpeed failed to implement reasonable controls to vet clients, and they allegedly made false statements to the banks about the degree to which they vetted and monitored the transactions of the merchant-clients.

The TSR prohibits any seller or telemarketer from creating RCC payments for goods or services offered or sold via telemarketing. The TSR also prohibits a person from providing substantial assistance to any seller or telemarketer when that person “knows or consciously avoids knowing” that the seller or telemarketer is engage in a prohibited practice. The CFPB’s complaint alleges that BrightSpeed knew or consciously avoided knowing that its merchant-clients were creating RCC payments for goods or services offered or sold via telemarketing.

The CFPA prohibits unfair acts and practices. An act or practice is unfair when (1) it causes or is likely to cause substantial injury to consumers; (2) which is not reasonably avoidable by consumers; and (3) such substantial injury is not outweighed by countervailing benefits to the consumers or to competition. The CFPB’s complaint alleges that BrightSpeed’s acts and practices caused substantial injury because it processed payments for consumers who were defrauded, and also alleges that BrightSpeed knew its merchant-clients were violating the TSR.

The CFPB asked the court to prohibit BrightSpeed from participating in the business of payment processing, and also asked the court to award damages, restitution, disgorgement of ill-gotten gains, and a civil penalty.

On March 18, Opportunity Financial, Inc. (OppFi) — a Chicago-based platform lender — announced that the Consumer Financial Protection Bureau (CFPB) is investigating its compliance with the Military Lending Act. The announcement — coupled with several others like it in recent months — confirms that the CFPB is closely monitoring fintechs.

OppFi is a consumer lending company that works with banks to facilitate loans to consumers who lack access to traditional credit. In a proxy filing related to its go-public deal with a special-purpose acquisition company (SPAC), OppFi disclosed that the CFPB “has issued a civil investigative demand … as a result of a consumer complaint” and is investigating whether OppFi’s “lending practices violated any consumer financial laws with respect to the Military Lending Act.” OppFi noted that it intends to cooperate with the CFPB in the investigation, but also that it has responded to the CFPB to “refute the number of affected consumers” and explain that the “impacted consumers were already provided with redress.”

The Military Lending Act provides loan protections for active duty servicemembers, their spouses, and certain dependents. Most notably, it caps the interest rate that can be charged to active duty servicemembers, their spouses, and their dependents for most consumer loans at 36%. It also prohibits creditors from requiring arbitration, mandating an allotment to repay the loan, or charging prepayment penalties to covered individuals, amongst other protections.

OppFi’s announcement confirms that the CFPB is closely monitoring fintechs. Indeed, in February 2021, Venmo, a mobile money transfer service, disclosed that the CFPB is investigating its collection practices. And in March 2021, Oportun, another online consumer lender, disclosed that the CFPB is investigating its debt collection practices.

The CFPB’s investigation — which, per OppFi, followed a consumer complaint — demonstrates again that companies subject to the CFPB’s jurisdiction should maintain robust consumer dispute-resolution procedures. It also demonstrates that the CFPB is focused on fintechs.

As we’ve previously noted, the CFPB — under the direction of Acting Director Dave Uejio — is returning to the more aggressive enforcement and rulemaking stance that characterized the agency under the Obama administration. We thus expect to see more announcements from fintechs, like OppFi, demonstrating the CFPB’s renewed vigor.

Troutman Pepper regularly defends companies before the CFPB and also regularly assists clients in building out and maintaining their compliance programs.

On March 11, the Consumer Financial Protection Bureau (CFPB) announced that it is rescinding a January 2020 policy statement that limited the “abusive acts and practices” standard created by the 2010 Dodd-Frank Act. By rescinding the policy statement, the CFPB — under the direction of Acting Director Dave Uejio — signals a return to the more aggressive enforcement and rulemaking stance that characterized the agency under the Obama administration.

With the 2010 Dodd-Frank Act, Congress gave the CFPB broad authority to prohibit “unfair, deceptive, or abusive acts or practices.” The unfairness and deception standards were largely carried over from the Federal Trade Commission Act, which prohibits “unfair or deceptive acts or practices.” But the abusiveness standard was something of an innovation, and in fact the Dodd-Frank Act was the first federal law to prohibit “abusive” acts or practices with respect to all consumer financial products and services.

But the Dodd-Frank Act did not clearly define the abusiveness standard, and the CFPB’s enforcement and supervisory efforts to date have not created a clear standard. That has frustrated many companies subject to the CFPB’s broad enforcement and supervisory authority, which argue that the uncertainty created by the abusiveness standard chills innovation and creates unnecessary compliance burdens.

Responding to those concerns, the CFPB’s January 2020 policy statement identified three principles that would govern the abusiveness standard.

  • Focus on Consumer Harm. The CFPB’s January 2020 policy statement indicated that the agency would focus on consumer harm, challenging conduct as abusive only if the harms caused by the conduct outweigh its benefits. That limitation mirrored a limitation Congress imposed on the unfairness standard. And it suggested that the CFPB would not challenge conduct that harmed a vulnerable subset of consumers if the conduct otherwise provided substantial benefits to consumers.
  • Avoid Duplicative Claims. The CFPB’s January 2020 policy statement indicated that the agency would avoid duplicative pleading, challenging conduct as abusive only when the conduct did not fall within the broad scope of its authority to prohibit unfair or deceptive conduct. That limitation was intended to bring “more certainty” to the abusiveness standard over time by forcing both the CFPB and the courts to distinguish between conduct that falls within the scope of the abusiveness standard and conduct that falls within the scope of the unfairness or deception standards.
  • Seek Monetary Relief Only from Bad Actors. The CFPB’s January 2020 policy statement indicated that the agency would not seek monetary remedies in actions alleging standalone abusiveness claims if the target of the action “made a good faith effort to comply with the law based on a reasonable — albeit mistaken — interpretation of the abusiveness standard.” That limitation recognized that, despite the CFPB’s policy statement, the abusiveness standard was still not clearly defined, such that companies subject to the CFPB’s authority were making “decisions about whether to engage in conduct notwithstanding uncertainty.”

In rescinding its January 2020 policy statement, the CFPB — now under the leadership of Acting Director Dave Uejio — said that the Trump-era policy statement did “not actually deliver clarity to regulated entities” and, to the contrary, added “uncertainty to market participants.”

And perhaps more concerning to industry groups, the CFPB’s policy shift signals a return to the more aggressive enforcement and rulemaking stance that characterized the agency under the Obama administration. Indeed, in rescinding its prior guidance, the CFPB noted that, by stating that the agency would not seek civil penalties or disgorgement for certain abusive acts or practices, the Trump-era policy statement “undermined deterrence and was contrary to the CFPB’s mission of protecting consumers.” And it also noted that it was committed to exercising “the full scope of its supervisory and enforcement authority.”

All said, companies subject to the CFPB’s broad enforcement and supervisory authority should prepare: Under the Biden administration, the CFPB will be an aggressive enforcement agency. This, coupled with the continuing efforts of an active FTC, should prompt regulated entities to review and update their written, risk-based compliance programs.

Troutman Pepper regularly defends companies before the CFPB and also regularly assists clients in building out and maintaining their compliance programs.

On February 23, the Consumer Financial Protection Bureau (CFPB) issued a statement that it planned to propose a rule to “delay the July 1, 2021 mandatory compliance date of the General QM Final Rule.” Consistent with that, the CFPB announced a notice of proposed rulemaking (NPRM) on March 3, which would push back the current mandatory compliance date for the General Qualified Mortgage (QM) Final Rule to October 1, 2022. This would significantly extend the “GSE patch” and may be a sign of more things to come.

As discussed more fully in a prior post, the General QM Final Rule was created to address the expiration of the GSE patch, which permits certain mortgage loans eligible for purchase or guarantee by Fannie Mae and Freddie Mac (GSEs) to qualify as QM loans despite not meeting all requirements of the General QM loan definition. It does this by removing a 43% debt-to-income (DTI) limit contained in the General QM loan definition and replaces it with a price-based threshold approach.

Under the General QM Final Rule, which became effective on March 1, lenders can still use the old General QM loan definition or the GSE patch to originate QM loans where the loan application was received before July 1, 2021. The proposed rule would make this the case until October 1, 2022. The CFPB believes, in light of the current financial difficulties created by the COVID-19 pandemic, the extension “may help ensure stability and access to affordable, responsible credit in the mortgage market.”

Since assuming the reigns of the agency, Acting Director Dave Uejio has made it clear that the CFPB will assume a more proactive and assertive role. Consistent with this, the CFPB indicated in its February statement that it is still considering whether to “initiate another rulemaking to reconsider other aspects of the General QM Final Rule.” In a similar manner, the CFPB indicated it’s also considering whether to initiate a rulemaking to amend or revoke the recently enacted Seasoned QM Final Rule.

Overall, lenders should expect to see more developments regarding the recently enacted General and Seasoned QM Final Rules. The CFPB is accepting comments on the NPRM until April 5.

On February 22, the Consumer Financial Protection Bureau (CFPB), joined by the attorneys general for Virginia, Massachusetts, and New York (States), filed suit against Libre by Nexus, Inc. (Libre). The suit alleges that Libre, an immigration bond services business, engaged in deceptive and abusive acts or practices in connection with its offer of credit to consumers for their immigration bonds. This suit, the first new public enforcement action of the Biden administration, highlights the theme of anti-discrimination, a stated priority of both the CFPB and Virginia Attorney General Mark Herring.

The complaint alleges 17 causes of action premised on both federal and state law. These claims are based on allegations that Libre exploits primarily Spanish-speaking immigrants held in federal detention by offering to pay for immigration bonds to secure the detainees’ release. In exchange, Libre demands fees and monthly payments, while allegedly concealing or misrepresenting the true costs of its services.

According to the complaint, Libre markets its services to consumers as an easy and affordable alternative method of securing the release of detainees from federal custody, but it is not a surety company certified by the U.S. Treasury or a licensed bail bond agent in any state. Of particular note, the complaint alleges that Libre engaged in “abusive” acts or practices in violation of the Consumer Financial Protection Act. In support of this claim, the complaint focuses on the fact that the vast majority of Libre’s clients and their co-signers are Spanish speakers, with little to no knowledge of English. The CFPB and the States note that Libre specifically markets to these customers with Spanish-language advertisements, but for at least three years used a client agreement written almost entirely in English.

By identifying these alleged acts and practices as “abusive,” the CFPB appears to confirm what panelists at the CFPB’s 2019 Symposium on Abusive Acts and Practices agreed upon. Namely, that a covered person’s act is allegedly abusive if it would harm a particularly vulnerable consumer, not an average consumer, and that the covered person must have specialized knowledge about the vulnerabilities or condition of the particular consumer engaging in a transaction.

This complaint also aligns with stated priorities of the CFPB and Attorney General Herring, who have both stated they will make an effort to target discriminatory practices. This enforcement action reflects tangible action consistent with the CFPB’s public statements to the effect that “[i]t is prioritizing the case to send a strong signal that financial scams targeting communities of color will not be tolerated.”[1] The suit also follows last year’s announcement by Attorney General Herring regarding the creation of an Office of Civil Rights within the Virginia attorney general’s office.[2] These steps appear to send a clear signal to companies that both state and federal agencies will continue to target and prioritize discriminatory acts and practices.

Libre denies all allegations filed against the company.[3] We will continue to monitor this case for further updates.

 

[1] CFPB, press release, “Consumer Financial Protection Bureau and Virginia, Massachusetts, and New York Attorneys General Sue Libre for Predatory Immigrant-Services Scam” (Feb. 22, 2021) available at https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-and-virginia-massachusetts-and-new-york-attorneys-general-sue-libre-for-predatory-immigrant-services-scam/.

[2] Attorney General Mark R. Herring, News Release, “Herring Launches Office of Civil Rights Within Attorney General’s Office” (Jan. 5, 2020), available at https://www.legistorm.com/stormfeed/view_rss/2108988/organization/81349/title/herring-launches-office-of-civil-rights-within-attorney-generals-office.html.

[3] Michael E. Miller, The Washington Post, “Virginia joins federal lawsuit against company accused of preying on immigrants” (Feb. 22, 2021), available at https://www.washingtonpost.com/local/virginia-joins-federal-lawsuit-against-company-accused-of-preying-on-immigrants/2021/02/22/93d2ee28-754d-11eb-8115-9ad5e9c02117_story.html.