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From Banking and Finance Law Daily, January 25, 2019

Online lender consents to CFPB’s $3.2M penalty

By J. Preston Carter, J.D., LL.M.

An online lender that debited bank accounts without authorization, debited the wrong accounts, and failed to honor loan extensions, violated the Consumer Financial Protection Act and agreed to pay a $3.2 million civil money penalty.

The Consumer Financial Protection Bureau has announced a settlement with Enova International, Inc., an online lender that extends unsecured payday and installment loans, and lines of credit. Under the terms of the consent order, Enova, among other things, is barred from making or initiating electronic fund transfers without valid authorization and must pay a $3.2 million civil money penalty. Enova consented to issuance of the order without admitting or denying findings of fact or conclusions of law.

The CFPB found that Enova engaged in unfair acts or practices prohibited by the Consumer Financial Protection Act by debiting consumers’ bank accounts without authorization. While consumers authorized Enova to deduct payments from certain accounts, the company in many instances debited different accounts that the consumers had not authorized it to use. The Bureau also found that Enova failed to honor loan extensions it granted to consumers. Enova consented to issuance of the order without admitting or denying findings of fact or conclusions of law.

Unauthorized debiting. According to the consent order, in 2010, Enova began using consumer bank account information it obtained from loan applications it had purchased from lead generators to overwrite consumer bank account information related to consumers’ outstanding loans that Enova maintained in its systems. Enova then, without authorization, electronically debited payments on 5,520 consumers’ outstanding loans from the new bank accounts.

Although it stopped overwriting existing bank account information on newly-purchased loan applications in June 2014, it continued to debit or attempt to debit 265 consumers’ bank accounts that had already been overwritten, at least 6,425 times. In December 2018, Enova stopped debiting any accounts for which it did not have a valid authorization. By then, Enova had extracted millions of dollars in unauthorized debits from consumers’ accounts. The CFPB found that Enova’s unauthorized debiting of consumers’ accounts constitutes an unfair act and practice in violation of sections 1031(c) and 1036(a) of the CFPA.

Failure to honor loan extensions. During this time period, Enova also offered certain consumers a same-day expedited funding option called "Flash Cash." Flash Cash was available only to consumers who had previously repaid two or more Enova loans, and who also had a debit card on file with Enova within an accepted network. As a result of failed funding to debit cards or file, erroneously created duplicate records, and erroneous processing of loan extensions, 308 consumers did not actually receive the extensions for which they were approved.

However, Enova debited consumers’ bank accounts for full loan payments instead of the extension fee Enova promised consumers would be debited, with the result that consumers experienced or were likely to experience unexpectedly low or negative balances, and were unable to use funds for other purposes as anticipated. In some instances, consumers incurred overdraft and non-sufficient fund fees as a result of these unexpected debits. The CFPB also determined that Enova’s failure to honor loan extensions also constituted an unfair act and practice in violation of section 1031(c) and 1036(a) of the CFPA.

Companies: Enova International, Inc.

MainStory: TopStory CFPB EnforcementActions Loans UDAAP

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