CFPB Settles with Payday Lenders for Deceptive Practices

Last week, in CFPB v. NDG Financial Corp. et al., the Consumer Financial Protection Bureau (CFPB) entered into a proposed settlement with several payday lenders and corporate officials based in Canada and Malta. As background, the corporate defendants consisted of a network of affiliated companies, known as the NDG Enterprise, which extended high-cost, short-term payday loans over the internet to consumers in all 50 states. The CFPB alleged the NDG Enterprise defendants violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on unfair, deceptive, and abusive acts and practices by (1) failing to obtain necessary licenses, (2) exceeding state usury limits, (3) making false threats to consumers, (4) deceiving consumers about their debts, and (5) using illegal wage-assignment clauses in violation of the Credit Practices Act.

As for the settlement, the CFPB permanently barred the entities from advertising, marketing, promoting, offering, originating, servicing, or collecting any consumer loan issued to any consumer residing in the United States. The CFPB also barred the entities from assigning, selling, or transferring any existing debt to another company and from disclosing, using, or benefiting from customer data. The proposed settlement covers 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., as well as some corporate officials.

Of note, this case was filed, litigated, and ultimately settled under three different directors – Richard Cordray, Mick Mulvaney, and Kathy Kraninger. It also comes in the midst of Director Kraninger’s recent statements that the CFPB will revise certain aspects of the Payday, Vehicle, Title, and High-Cost Installment Loan Rule. While this case doesn’t shed any light on the pending revisions, it should be a wake-up call to the small dollar industry. The CFPB, under Director Kraninger, will continue to take a hard line stance against unfair, deceptive, and abusive acts and practices.