WASHINGTON–The CFPB has taken action against and imposed fines on an online lender and an auto title lender.
In the first action, the CFPB has moved against online lender Flurish, Inc., doing business as LendUp, for failing to deliver the promised benefits of its products. The CFPB said it found that the company did not give consumers the opportunity to build credit and provide access to cheaper loans, as it claimed to consumers it would. The Bureau has ordered the company to provide more than 50,000 consumers with approximately $1.83 million in refunds. The company will also pay a civil penalty of $1.8 million.
“LendUp pitched itself as a consumer-friendly, tech-savvy alternative to traditional payday loans, but it did not pay enough attention to the consumer financial laws,” said CFPB Director Richard Cordray. “The CFPB supports innovation in the fintech space, but start-ups are just like established companies in that they must treat consumers fairly and comply with the law.”
Flurish, Inc., doing business as LendUp, is an online lending company based in San Francisco that offers single-payment loans and installment loans in 24 states. The company began marketing its loans in 2012 as a way for consumers to build credit and improve credit scores, and it offered consumers who participated in the program the ability to progress to loans with more favorable terms, including lower rates and longer repayment periods, over time. The company advertised this opportunity as the ability to move up the “LendUp Ladder,” according to the CFPB.
Separately, the CFPB has also taken action against TitleMax parent company TMX Finance, LLC for luring consumers into what it said were costly loan renewals by presenting them with misleading information about the deals’ terms and costs. The lender also used unfair debt collection tactics that illegally exposed information about debts to borrowers’ employers, friends, and family. The Bureau ordered TMX Finance to stop its unlawful practices and pay a $9-million penalty.
“TMX Finance lured consumers into more expensive loans with information that hid the true costs of the deal,” said Cordray. "They then followed up with intrusive visits to homes and workplaces that put consumers’ personal information at risk. Today we are making it clear that these actions were unacceptable and illegal.”
TMX Finance, which is based in Savannah, Ga., is one of the country’s largest auto title lenders, with more than 1,300 storefronts in 18 states. TMX Finance offers title and personal loans through a host of state subsidiaries under the names TitleMax, TitleBucks, and InstaLoan.
The CFPB said it found that store employees, as part of their sales pitch for the 30-day loans, offered consumers a “monthly option” for making loan payments. They then offered consumers a “Voluntary Payback Guide” that showed how to repay the loan with smaller payments over a longer time period.
“But the guide and sales pitch did not explain the true cost of the loan if the consumer renewed it multiple times,” the CFPB said. “TMX Finance employees also unlawfully exposed sensitive personal information during ‘field visits’ to consumers’ homes, references, and places of employment in attempts to collect debt.