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From Banking and Finance Law Daily, October 14, 2016

Online lender, CFPB appeal administrative law judge’s recommended decision

By Thomas G. Wolfe, J.D.

Not only have Integrity Advance, LLC, an online lender, and its CEO, James R. Carnes, appealed a recent decision by an administrative law judge recommending more than $38 million be paid in restitution to consumers who were allegedly deceived by the costs associated with the company’s short-term loans, the Consumer Financial Protection Bureau has appealed portions of the judge’s recommended decision in its enforcement action as well.

As previously reported (see Banking and Finance Law DailyOct. 3, 2016), Administrative Law Judge Parlen McKenna, in a 130-page Recommended Decision on Sept. 27, 2016, determined that Integrity Advance: (i) violated the Truth in Lending Act by disclosing incorrect finance fees and annual percentage rates in its loan agreements; (ii) violated the Electronic Funds Transfer Act by conditioning its loans on repayment by electronic means; and (iii) violated the Consumer Financial Protection Act’s prohibition against deceptive acts or practices by, among other things, using a loan agreement that was likely to mislead consumers, and violated the CFPA’s prohibition against unfairness by using remotely created checks to obtain funds from consumers’ accounts after those consumers blocked authorization for electronic debits.

In addition to recommending more than $38 million in restitution, McKenna also recommended a civil penalty against Integrity Advance of more than $8.15 million and a civil penalty against Carnes for more than $5.4 million.

Appeal by Integrity Advance, Carnes. In their recent notice of appeal, Integrity Advance and Carnes take exception to all findings of liability and all recommended relief against them in the Recommended Decision, contending that the findings of fact, conclusions of law, and the proposed relief are "arbitrary, capricious, an abuse of discretion, not in accordance with law and/or unsupported by reliable, probative, and substantial evidence."

In addition, Integrity Advance and Carnes take exception to the portions of the judge’s prior orders, namely anApril 22, 2016, order denying their motion to dismiss the CFPB’s charges and a July 1, 2016, orderaddressing the parties’ respective motions for summary disposition, to the extent that these orders were relied upon in imposing liability and relief under the Recommended Decision.

Appeal by CFPB. In its Oct. 12, 2016, notice of appeal, the CFPB takes issue with two isolated conclusions reached by McKenna in the lengthy Recommended Decision. First, the CFPB appeals the judge’s legal conclusion that the CFPB is not entitled to relief for Integrity Advance’s TILA violations that occurred prior to July 21, 2011. Second, the CFPB appeals the judge’s conclusion that the CFPB could not properly seek restitution as relief for Integrity Advance’s violation of the CFPA under Count II of the CFPB’s charges.

Companies: Integrity Advance, LLC

MainStory: TopStory CFPB ChecksElectronicTransfers CreditDebitGiftCards DelawareNews DoddFrankAct EnforcementActions Loans TruthInLending UDAAP

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