On April 27, 2017 the Consumer Financial Protection Bureau (CFPB) sued four online installment loan companies – Golden Valley Landing, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc. – for unfair, abusive, and deceptive practices toward consumers by collecting on debts that consumers did not legally owe. CFPB asserted that the four lenders were not legally allowed to collect these debts because the loans exceeded states’ respective interest-rate caps, and thus violated those states’ usury laws. CFPB also asserted that the four installment loan companies took measures like contacting consumers by phone, email, letter, or text message entailing the consumer’s responsibility to repay those illegal loans.
The four installment loan companies have their service provided throughout the United States and are all owned by Habematolel Pomo of Upper Lake Indian Tribe, which is a federally recognized Indian tribe located in Upper Lake, California. The four online lenders extended credit loans that were provided to customers mostly for family, personal, or household purposes. They loaned consumers between $300 and $1,200 with a repayment schedule of 20 payments over the course of 10 months. For every installment, a customer paid $30 for every $100 of principal outstanding and in addition five percent of the original principal. This resulted in annual interest rates of between approximately 440 percent and 950 percent.
CFPB alleges that the excessive loans violated special state licensing requirements and interest-rate caps of around 17 states. The installment loan companies violated provisions of the Dodd-Frank Wall Street Reform, the Truth in Lending Act (companies were “creditors of this Act and Regulation), and the Consumer Protection Act.
CFPB is seeking to enjoin the installment loan companies from pursuing future violations of CFPA, the Truth in Lending Act, or any other relevant provision. Moreover, CFPB is seeking to redress the monetary damage done by the loan lenders to the consumers.