WASHINGTON— The Consumer Financial Protection Bureau (CFPB) has sued Acima and its former chief executive officer, Aaron Allred, for illegal lending activities in connection with what it alleged were as many as five million consumer financing agreements.
The CFPB alleges Acima used deceptive dark patterns and other tricks to trap consumers in high-cost credit agreements to finance the purchase of household goods.
“Acima sought to disguise many of these credit agreements as leases to evade consumer financial protection laws,” the CFPB said. “Due to Acima’s deception and obstruction, many consumers did not understand they were agreeing to expensive markups, exorbitant finance charges, and having few ways to escape their contracts.”
The CFPB is asking that the court order the defendants to forfeit the illegally obtained profits, give refunds to consumers, and halt their misconduct.
Acima Holdings and its subsidiary, Acima Digital, are two point-of-sale financing companies based in Utah.
About the Companies
According to the Bureau, in 2020, Rent-a-Center announced that it would be acquiring Acima Holdings for approximately $1.65 billion. Rent-a-Center, Acima’s parent company, is now known as Upbound Group, Inc. Acima was co-founded in 2013 by defendant Aaron Allred, who also served as its chief executive officer, and has operated under a number of brand names, including Simple Finance, the CFPB said. Acima offers a financing product, which it purports to be a lease or “virtual rent-to-own” product, in 46 states. Acima’s financing product is primarily for durable household goods.
“Acima’s financing product works like this: consumers apply for financing, often through a mobile application process, and are approved for a certain amount of money,” the CFPB said. “Consumers then shop for and select their desired home good products. Acima nominally purchases the items selected by consumers from independent merchant partners. It then finances the products back to consumers for a term that is usually 12 months.
‘Ensnare Vulnerable Consumers’
“Acima designed its credit product to ensnare vulnerable consumers with poor or limited credit into financial obligations that ended up costing many of them more than 200% of a good’s retail price,” the CFPB said. “Acima often marketed their product as credit, but elsewhere referred to it as a lease. In doing so, Acima misled shoppers about the nature of their agreements and its key terms. Referring to their product sometimes as a leasing product and other times as a credit product was also an attempt to dodge consumer financial protection laws that cover only leasing or only credit products.”
The CFPB’s lawsuit alleges Acima violated the Consumer Financial Protection Act, Truth in Lending Act, Fair Credit Reporting Act, and Electronic Fund Transfer Act.
The Specifics
Specifically, the CFPB alleges Acima has misled and harmed consumers through:
- False marketing: “Acima sometimes marketed its product to consumers as a form of credit to finance their purchase of household goods. Only later did many of these borrowers learn that Acima called the financing agreement a ‘lease.’ Acima also deceptively marketed its 90-day “early purchase option” with misleading statements that indicated it was offering an interest-free 90-day loan. In reality, the “early purchase option” cost the consumer more than the household goods purchased.”
- Deceptive digital dark patterns: “Acima deployed an application process designed to dupe borrowers. Acima first required borrowers to apply for Acima’s ‘financing.’ After being approved for a certain amount, shoppers would then select home goods for purchase. For some time, it was only once a shopper went to check out that Acima provided consumers an agreement—which Acima insisted was a lease. And even then, in the mobile application that most consumers used to enroll, Acima hid and obscured the agreement during the application process through various formatting and design features, such as using fine print and covering up the agreement with pop-ups.”
- Trapping borrowers: “Borrowers who thought they could escape the exorbitant cost of an Acima agreement by returning the goods—as Acima had promised they could—found that Acima had built a returns system designed to make it absurdly difficult to do so. In the end, less than 1% of all Acima consumers ever returned their goods.”
- Widespread credit reporting failures: “Acima reported inaccurate information about its borrowers, some of which may have negatively affected their credit and ability to obtain future financing,” the CFPB said. “Acima also failed to properly notify consumers when it reported negative information about them. Further, when a consumer alleged fraud or identity theft, Acima illegally refused to investigate the allegation unless the consumer submitted a police report. Finally, Acima may have illegally obtained and used consumer reports to target vulnerable potential borrowers.”
Enforcement Action
The CFPB said its lawsuit is seeking a stop to alleged unlawful conduct, redress for harmed borrowers, and the imposition of a civil money penalty, which would be paid into the CFPB’s victims relief fund.