Fintech ordered to refund millions, pay penalty, for enabling loans to consumers without their permission

Enabling merchants to secure loans for consumers without their authorization has earned an Atlanta-based fintech company a consent order from the federal consumer financial protection agency, essentially requiring a refund of up to $9 million in loans and a $2.5 million penalty.

In a release, the Consumer Financial Protection Bureau (CFPB) said it had issued a consent order against GreenSky LLC (of Atlanta) for enabling contractors and other merchants to take out loans on behalf of thousands of consumers who did not request or authorize the loans.

The bureau said its order requires GreenSky to refund or cancel up to $( million in loans for customers harmed by the firm’s illegal conduct. The firm is also ordered to pay $2.5 million in civil money penalty (CMP), and must implement what the agency said are “implement new procedures to prevent future fraudulent loans.”

CFPB alleged that GreenSky used merchants, primarily those providing home improvements, to promote and offer financing to customers before making on-the-spot lending decisions based on criteria provided by its partner banks. “Proceeds from GreenSky’s loans, ranging from a few thousand to tens of thousands of dollars, bypass consumers and are disbursed directly to merchants following the merchants’ application for payment.,” the bureau said in a release. “Some consumers complained that they never applied for a loan or even heard of GreenSky before receiving billing statements, collection letters, and calls from the company.”

The bureau stated that violations of loan origination and servicing under the Consumer Financial Protection Act of 2010 (CFPA) by GreenSky included:

  • Servicing and facilitating the origination of loans to consumers who did not request or authorize them. Between 2014 and 2019, CFPB alleged that GreenSky received at least 6,000 complaints from consumers who stated they did not authorize submission of a loan application. The company’s complaint investigations found that in at least 1,600 instances its merchants were at fault, the agency said.
  • The firm failed to create and implement appropriate and effective controls during the loan application, approval, and funding processes, failed to implement adequate merchant training and oversight, and neglected to effectively manage consumer complaints.

In addition to the refund and fines, GreenSky is required by CFPB to prevent future illegal practices by verifying consumers’ identities and confirming their authorizations prior to activating loans or disbursing loan proceeds. “GreenSky must also implement an effective consumer complaint management program, exercise effective oversight of third-party merchant partners, and implement consistent standards to govern the write-off of illegal loans,” the agency said.

CFPB consent order against GreenSky LLC