CFPB Files Complaint Against Online Lender Alleging MLA Violations
On September 29, 2002, the Consumer Financial Protection Bureau (“CFPB”) filed a lawsuit against online lender MoneyLion Technologies, Inc., and several dozen of its affiliates (collectively, “MoneyLion”), alleging violations of Military Lending Act (“MP”). The Complaint alleges that MoneyLion (i) overcharged service members and their dependents by charging fees which, together with the stated interest rates, exceeded the MLA’s 36% Military Annual Percentage Rate (“MAPR”). , (ii) failed to provide the required information, and (iii) included arbitration clauses prohibited by the LBA. The Bureau further alleges that service members became ‘trapped’ in MoneyLion’s membership program after taking out their loans and were unable to cancel their memberships – which required paying a monthly fee – without first repaying. their loans.
According to the CFPB, MoneyLion has been offering loans since 2017 that consumers can access through its website and mobile app by signing up for membership programs and paying a monthly membership fee. The CFPB alleges that MoneyLion told consumers over several years that they had the right to cancel their membership for any reason, even though it had a policy of barring consumers with outstanding loan balances. to cancel their membership. Beyond that, the complaint alleges that even after the loan was repaid, some consumers were unable to cancel their memberships until they had paid past and unpaid membership fees; that consumers were prohibited from repaying their loans using funds from MoneyLion investment accounts; and that MoneyLion has sometimes refused to honor requests to stop ACH withdrawals of membership fees even after memberships have been canceled.
The MLA and its regulations contain protections for service members and their identified dependents as “covered borrowers” initiating certain credit transactions, including installment loans of the type at issue in this case. These protections include maximum MAPR, prohibition against requiring arbitration, and mandatory loan disclosure. 10 USC § 987(b), (c), (e)(3); 32 CFR §§ 232.4(b), 232.6, 232.8(c). The complaint alleges violations of these MLA limits and requirements.
As detailed in the complaint, the Bureau alleges that the monthly membership fees charged by MoneyLion – typically $19.99 but as high as $29.00 – pushed the MAPR of installment loans, offered at APRs between 5, 9% and 29.99%, above the MAPR of 36% of the MLA. threshold. Under the MLA, attendance fees are generally included in the calculation of MAPR even though such fees would be excluded from the finance charge under Z. 32 CFR § 232.4(c)(1)(iv).
With respect to arbitration, the Bureau alleges that the loan agreements used by MoneyLion from fall 2017 until at least August 2019 required borrowers to submit to arbitration in the event of a dispute, with no exceptions for covered borrowers, in violation of 10 USC § 987(e)(3) and 32 CFR § 232.8(c). The Bureau alleges that, during this same period, MoneyLion failed to make certain disclosures before or at the time a Covered Borrower became obligated on a loan, including mandatory MAPR disclosure. Under the MLA, creditors are required to disclose a “MAPR statement,” stating that federal law provides protections for members of the armed forces and their dependents regarding consumer credit extensions, and that the cost of this credit cannot exceed an APR of 36%, including certain costs and fees. This disclosure must be provided in writing in a form that the borrower can retain and must also be provided orally (in person or via a toll-free number). 10 USC § 987(c), 32 CFR § 232.6.
The complaint also alleges causes of action under the Consumer Financial Protection Act of 2010 (“CFPA”), including deceptive acts and practices regarding loan balances and membership fees and restrictions on cancellation of membership, unfair acts and practices related to the charging of membership fees. after consumer membership cancellation requests and abusive acts and practices related to membership program loans. 12 USC §§ 5531, 5536(a).
Announcing the action against MoneyLion, CFPB Director Rohit Chopra said, “MoneyLion has targeted military families by illegally collecting fees and making it difficult to cancel monthly subscriptions. Businesses break the law when they charge monthly membership fees for loans and then create barriers to canceling those memberships.
The CFPB is seeking monetary relief, reimbursement, or compensation to covered borrowers for unjust enrichment, civil monetary penalties, and a permanent injunction prohibiting practices that allegedly violate the MLA and CFPA. According to the CFPB, this is its fourth MLA enforcement action in the past two years.