CFPB, two states file lawsuit against broker of schemes for high-interest credit to disabled veterans, others

A broker arranging high-interest credit agreements to consumers – particularly disabled veterans – was sued by the federal consumer financial protection agency and two states in action filed Thursday, the regulators said.

The Consumer Financial Protection Bureau (CFPB), the South Carolina Department of Consumer Affairs (South Carolina), and Arkansas Attorney General Leslie Rutledge (Arkansas) said in a joint release that they jointly filed the lawsuit in federal district court in the District of South Carolina against Candy Kern-Fuller, Howard Sutter III, and Upstate Law Group LLC.

According to the federal and state authorities, the lawsuit alleges that the defendants brokered contracts with a series of companies offering high-interest credit to consumers, primarily disabled veterans, and violated the Consumer Financial Protection Act’s prohibition against deceptive acts or practices and against providing substantial assistance to deceptive and unfair acts or practices of others.

According to the agencies, the action follows up on other lawsuits filed beginning last year against defendants who used similar contracts and similar marketing tactics in offering high-interest credit to veterans.

The regulators said Thursday’s action builds on those previous actions in that CFPB, South Carolina and Arkansas allege that the defendants in the most recent lawsuit provided substantial assistance to deceptive and unfair acts or practices by the companies sued last year.

Among the deceptive and unfair acts: developing a pre-approval or risk-assessment process for the contracts and conducting underwriting; approving or denying consumers’ applications to enter into the transactions; directing and administering the execution of the contracts; serving as the payment processor for the initial lump-sum payment and fees; and continuing to serve as the transactions’ payment processor.

The regulators also alleged that the defendants in the latest lawsuit “provided substantial assistance to deceptive misrepresentations” by the companies they worked with to consumers stating that those consumers may be subject to criminal prosecution if they breached their contacts. In fact, the agencies said, those consumers could not be criminally prosecuted for breaching their contracts.

“The Bureau also alleges that the defendants committed deceptive acts or practices by collecting on the contracts brokered by the companies, including by filing suit when consumers failed to make payments, and representing, expressly or impliedly, that consumers are legally obligated to make payments in accordance with the terms of their contracts when, in fact, the contracts are void from inception and consumers are not obligated to make payments.”

The agencies said their complaint seeks an injunction, redress to consumers, and the imposition of civil money penalties.

Consumer Financial Protection Bureau, South Carolina, and Arkansas File Suit Against Brokers of High-Interest Credit Offers

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