$2 million-plus penalty assessed for making prohibited loans to military members

A penalty of $2.175 million must be paid by a Las Vegas, Nev., firm for violations of federal law regulating lending to members of the military, the Consumer Financial Protection Bureau (CFPB) said Dec. 30.

In a consent order against Omni Financial of Nevada, Inc., the bureau said the firm violated the Military Lending Act (MLA), Electronic Fund Transfer Act (EFTA), and Consumer Financial Protection Act of 2010 (CFPA) in connection with making installment loans.

The bureau said it found that installment loans made by Omni since October 2016 to members of the military violated the MLA’s prohibition against requiring repayment by allotment. Under the MLA, the bureau stated, loans to covered borrowers to be repaid by allotment are prohibited. The Department of Defense runs the allotment system, the bureau noted, which allows servicemembers to designate a portion of their paychecks to certain recipients.

CFPB also said it found that the firm violated the EFTA and the CFPA. “In addition to lending to active-duty servicemembers and their dependents, Omni lends to civilians and non-covered servicemembers, such as military retirees,” the agency said. “The Bureau found that Omni requires all of its borrowers to provide bank-account information and authorize Omni to withdraw funds from that account on the first business day after each missed payment.

“Omni’s requirement that consumers allow it to withdraw funds from their bank accounts violates EFTA’s prohibition against requiring consumers to preauthorize electronic fund transfers as a condition of receiving credit. “ The Bureau said it also found that the EFTA violations constituted CFPA violations.

The order prohibits future violations and requires Omni to provide notice of the agency’s findings to all customers repaying their loans by allotment along with notice that they may change their repayment method. Omni also must, the agency said, provide training to employees and is prohibited from providing any incentives to employees or performance evaluations that consider the number or rate of consumers who choose to repay by allotment.

Consumer Financial Protection Bureau Settles with Omni Financial of Nevada, Inc. for Violations of the Military Lending Act, Electronic Fund Transfer Act, and Consumer Financial Protection Act