Deceptive acts or practices in taking deposits from and offering credit to consumers – allegedly at interest rates nearing 1000% – has earned a Florida company and its chief executive a lawsuit by the federal consumer financial protection agency seeking an injunction and damages, among other things.
In a release, the Consumer Financial Protection Bureau (CFPB) said it had brought the action against Driver Loan, LLC, of Doral, Fla. and its chief executive Angelo Jose Sarjeant. The bureau alleged that the firm and Sarjeant violated the Consumer Financial Protection Act of 2010 (CFPA) by misrepresenting the risks associated with the deposit product it offered to consumers and by misrepresenting the annual percentage rate (APR) for extensions of credit it offered to other consumers.
More specifically, the bureau alleged that the company and its leader since 2017 offered short-term, high-interest personal loans totaling more than $30 million, typically to drivers who work with ride-share companies. The loans range from $100 to $500 each and are repayable in 15 daily installments, the bureau said. It alleged that Driver Loan “deceptively markets its loans as having an APR of 440% when the actual APRs are about 975%.”
In 2020, the bureau stated, the company began taking consumer deposits to fund its lending, claiming to guarantee a 15% annual percentage yield (APY) on the deposits. Additionally, the CFPB alleged, Driver Loan claimed “to guarantee that consumers’ deposits are held at FDIC-insured institutions, which would protect against the loss of insured deposits.”
“The Bureau alleges that Driver Loan’s representations are false, as many consumers’ funds were not held in FDIC-insured accounts, the rate of return was not ‘guaranteed,’ and other consumers were not rushing to deposit their funds with Driver Loan,” the bureau said, referring to a claim by the company that “a new consumer deposits funds with the company about every minute.”
The CFPB suit also alleges that most deposited funds are lent to borrowers at rates that violate Florida’s state criminal-usury law, “rendering the loans uncollectable and creating substantial risk that Driver Loan would not be able to collect delinquent loans or meet its obligations to consumers who sought to withdraw their deposited funds.”
The CFPB said it is seeking an injunction against Driver Loan and Sarjeant to stop their alleged unlawful conduct, as well as damages, redress to consumers, disgorgement of ill-gotten gains, and the imposition of civil money penalties.