A proposed settlement with up to nine payday lending groups and three individuals would permanently ban them from offering the typically short-term, high-interest loans to any consumer in the U.S. – and bar them from collecting on existing loans, the federal consumer financial protection agency said Friday.
The settlement is awaiting approval by the U.S. District Court for the Southern District of New York, where the action was filed, the agency said.
In a proposed consent agreement, the Consumer Financial Protection Bureau (CFPB) said that it’s proposing the ban on the payday lenders for violating the Consumer Financial Protection Act of 2010 by “misrepresenting to consumers in states where loans offered by the defendants violated state licensing or usury laws that they were obligated to repay loan amounts when such an obligation did not exist because state law voided the loan.”
The bureau said the settlement is with the nine groups and two individuals that are based in Canada and Malta. The groups are: NDG Financial Corp., E-Care Contact Centers, Ltd., Blizzard Interactive Corp., New World Consolidated Lending Corp., New World Lenders Corp., Payroll Loans First Lenders Corp., New World RRSP Lenders Corp., Northway Financial Corp., Ltd., and Northway Broker, Ltd. The individuals are corporate officials Kimberly DeThomas, Jeremy Sabourin, and William Wrixon, the CFPB said.
DeThomas, Sabourin, and Wrixon were officers or directors of the corporate defendants beginning in 2009, the CFPB filings said; they became owners of the Canadian NDG Defendants in September 2013.
In addition to misrepresenting the loans, the bureau said the organizations and individuals also:
- misrepresented that the loan agreements were not subject to United States federal or state law;
- misrepresented that non-payment of debt would result in lawsuits, arrests, imprisonment, or wage garnishment; and
- conditioned loan agreements upon irrevocable wage assignment clauses, which the bureau alleges violated the Credit Practices Act.
The ban on continuing to offer payday loans is extensive, according to the proposed settlement. CFPB said the defendants are permanently barred from advertising, marketing, promoting, offering, originating, servicing, or collecting any consumer loan issued to any consumer residing in the United States, including assisting others and receiving remuneration from providing service to assist others in this conduct.
They are also permanently barred from collecting on any of their existing loans to U.S. consumers, “including any efforts to assign, sell or transfer such loans or any other action that would allow anyone to collect on such loans,” the bureau said. Additionally, they are permanently barred from disclosing, using, or benefitting from customer information associated with their existing loans to consumers in the United States.
According to the agency filings, the actions against the companies began in 2015. CFPB said the nine corporate defendants did not obtain licenses to lend to consumers from any state before they marketed and offered loans to consumers. Despite that, the bureau said, the organizations told consumers (either expressly or by implication) that they were obligated to repay loan amounts when such an obligation did not exist (even though those consumers lived in states where the companies’ loans violated state licensing or usury laws and consumers were not legally obligated to repay the loans).
“The Corporate Defendants reinforced these representations by: (a) sending executed loan agreements; (b) sending demand letters for payment; (c) originating Automated Clearinghouse debit entries from consumer bank accounts; (d) offering and accepting repayment through money service transmitters; and (e) contacting consumers by telephone to demand repayment,” CFPB said. The companies also represented that they had the legal right to collect certain loan payments for these loans.
In fact, the bureau said, companies collected repayments from consumers in the U.S., including those residing states where the loans were void in whole or in part due to the state’s usury limit or licensing requirement. In loan agreements and communications with consumers, the companies told borrowers that they and the loan agreements were not subject to U.S. federal or state law and instead represented that Maltese law applied, CFPB said.