WASHINGTON–The Consumer Financial Protection Bureau has taken action today against an online lender, Integrity Advance, LLC, and its CEO, James R. Carnes, for deceiving consumers about the cost of short-term loans.
The Bureau alleges that the company’s contracts did not disclose the costs consumers would pay under the default terms of the contracts. The CFPB also alleges that the company unfairly used remotely created checks to debit consumers’ bank accounts even after the consumers revoked authorization for automatic withdrawals. The CFPB filed an administrative lawsuit seeking redress for harmed consumers, as well as a civil money penalty and injunctive relief.
Integrity Advance was a Delaware-based online lender which originated and serviced short-term loans to consumers around the country. From May 2008 through December 2012, Integrity Advance offered loans ranging from $100 to $1,000, and consumers typically applied for the loans by entering their personal information into a lead generator website, according to the CFPB.
The CFPB said that under the default terms of Integrity Advance’s contracts, the loans would roll over four times—causing additional charges to accrue with each rollover—before the company applied any of the payments to the principal amounts. “However, the costs on the disclosures were based on the assumption that the loans would not roll over and would instead be repaid in full by the first payment,” the CFPB said. “Integrity Advance never informed consumers of the total costs of their loans if those loans were rolled over, even though the contracts were set up to roll over automatically. Under the default terms of the contracts, consumers would end up paying finance charges more than double the amount originally borrowed: $765 in finance charges for a typical $300 loan.”
The CFPB is alleging that Integrity Advance violated the Truth in Lending Act and the Electronic Fund Transfer Act, and that Integrity Advance and Carnes violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition against unfair and deceptive acts and practices.