Last week, the Consumer Financial Protection Bureau (CFPB) announced a settlement with Springstone Financial, LLC, for deceptive practices related to enrolling consumers in deferred-interest credit products. Springstone administered a health-financing program through which consumers could finance various medical treatments, including dental treatments. Consumers could apply for credit either through Springstone’s website or at their medical provider’s office. In the case of the latter, the health care providers’ staff — who were trained and monitored by Springstone — would provide consumers with application materials and assist them in filling out the application before submitting it to Springstone on consumers’ behalf. The CFPB’s claim centered on these providers. “In some cases,” according to the CFPB, dental staff allegedly told consumers that the deferred-interest product was a no-interest loan and failed to mention that a 22.98 percent interest rate would apply from the date of the loan if the loan balance was not paid in full by the end of the promotional period. The CFPB found these practices deceptive and determined that more than 3,200 consumers “may have been” affected by them. As a result, Springstone was ordered to provide $700,000 in restitution to the 3,200 consumers who ended up paying deferred interest on a loan they applied for with a health-care provider’s assistance. The CFPB did not assess a civil money penalty.
Grab a flotation device – the final decision recently issued by Director Richard Cordray of the Consumer Financial Protection Bureau (“CFPB”) in the administrative enforcement proceedings against PHH Corp. (“PHH”) has rocked the boat for the real estate settlement services industry as portions of the decision run directly counter to decades of legal precedent, and the prior writings and Policy Statements issued by the Department of Housing and Urban Development (“HUD”) – the federal agency previously tasked with interpreting the federal Real Estate Settlement Procedures Act (“RESPA”) and enforcing its provisions. As K&L Gates summarized in its June 22, 2015 Alert, the decision addresses a number of topics, including Director Cordray’s interpretation of several provisions of the federal RESPA. And while many of the CFPB’s views and interpretations attempt to expand the scope of RESPA’s reach and are subject to criticism, one of the most significant developments is Director Cordray’s conclusion that Section 8(c)(2) of RESPA is not the type of safe harbor that has long been widely accepted.
In 2013, the CFPB filed a complaint against CashCall, Inc. and others, alleging that their conduct in collecting on payday loans that allegedly violated certain states’ usury and/or licensing requirements constituted unfair, deceptive and abusive acts and practices (UDAAPs) under federal law. Late last week, the CFPB struck again, filing suit against NDG Financial Corp. and others, making similar claims. The complaint against NDG, however, both expands the list of states where the CFPB alleges that collecting on a usurious and/or unlicensed payday loan is a UDAAP and changes the theory of abusiveness upon which the CFPB relies.