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From Banking and Finance Law Daily, February 1, 2019

CFPB settles with Canadian payday lender for illegal loan collections

By J. Preston Carter, J.D., LL.M.

The CFPB filed a proposed settlement with a Canadian payday lending conglomerate for allegedly collecting money consumers did not owe.

The Consumer Financial Protection Bureau filed a proposed settlement with Canadian payday lender NDG Financial Corp., its controlled companies, and several corporate officials to settle Bureau charges that the defendants violated the Consumer Financial Protection Act by misrepresenting to consumers in states where loans offered by the defendants violated state licensing or usury laws that the consumers were obligated to repay loan amounts although the obligation did not exist because state law voided the loan. When the CFPB filed its complaint in 2015, then Director Richard Cordray said, "Companies making loans within the U.S. have to comply with federal law, and the Consumer Bureau will work to ensure that American consumers receive the protections and fair treatment they deserve" (see Banking and Finance Law Daily, Aug. 4, 2015) (CFPB v. NDG Financial Corp., Case No. 1:15-cv-05211-CM).

The CFPB also alleged that the payday lenders:

  • misrepresented that the loan agreements were not subject to U.S. federal or state law;
  • misrepresented that non-payment of debt would result in lawsuits, arrests, imprisonment, or wage garnishment; and
  • conditioned loan agreements upon irrevocable wage assignment clauses, which the Bureau alleges violated the Credit Practices Act.

Under the terms of the proposed consent order, the defendants must pay damages and other monetary relief as the court finds necessary to redress injury to the consumers, they must disgorge ill-gotten gains, and they must pay the costs of bringing the action. The proposed settlement also permanently bars the defendants from advertising, marketing, promoting, offering, originating, servicing, or collecting any consumer loan issued to any consumer residing in the United States, including assisting others and receiving remuneration from providing service to assist others in this conduct. They are also permanently barred from collecting on any of their existing loans to U.S. consumers, including any efforts to assign, sell, or transfer the loans or any other action that would allow anyone to collect on the loans. Additionally, they are permanently barred from disclosing, using, or benefitting from customer information associated with their existing loans to consumers in the United States.

The Bureau’s press release noted that the proposed consent order awaits approval by the U.S. District Court for the Southern District of New York, where the action was filed.

Companies: Blizzard Interactive Corp.; E-Care Contact Centers, Ltd.; NDG Financial Corp.; New World Consolidated Lending Corp.; New World Lenders Corp.; New World RRSP Lenders Corp.; Northway Broker, Ltd.; Northway Financial Corp., Ltd.; Payroll Loans First Lenders Corp.; Sagewood Holdings, Ltd.

MainStory: TopStory ConsumerCredit CFPB DoddFrankAct EnforcementActions Loans NewYorkNews UDAAP

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