/>iOn February 23, the CFPB filed a joint stipulation in the United District Court for the Central District of California to dismiss its lawsuit against an online lending platform. The lawsuit, originally filed in May 2024, alleged that the platform misled borrowers about the total cost of its loans in violation of the Fair Credit Reporting Act (FCRA) and the Consumer Financial Protection Act (CFPA).
The dismissal follows a broader litigation freeze ordered by CFPB Acting Director Russ Vought (previously discussed here). The CFPB had previously sought a stay in the case against the online lending platform, but the U.S. district court judge denied the request, stating that there was “no good cause shown”.
The original lawsuit raised allegations concerning the platform’s lending practices, including:
- Deceptive advertising of loan terms. The platform advertised its loans of having no interest or 0% APR while almost all loans required borrowers to pay lender tip fees or platform donation fees, significantly increasing the cost of borrowing.
- Misleading loan disclosures. Borrowers were provided promissory notes and Truth in Lending disclosures that incorrectly stated loan costs, failing to include lender tip fees and platform donation fees.
- Obscuring fee opt-outs. The platform allegedly designed its loan request process to obscure the “no donation” option, requiring borrowers to select a pre-set donation amount, interfering with their ability to understand loan terms.
- Unlawful collection practices. The CFPB alleged that the platform attempted to collect payments on loans that were void or uncollectible under certain state usury or lender-licensing laws, misrepresenting borrowers’ repayment obligations and threatening negative credit reporting despite not actually reporting to credit bureaus.
Putting It Into Practice: Although the CFPB has dismissed the lawsuit, the issues raised in the case remain relevant for fintechs relying on nontraditional fee models (previously discussed here). While the lawsuit did not result in a legal determination, the CFPB’s approach underscores the risk for other companies operating under similar business models, particularly earned-wage access providers that rely on voluntary tips as state regulators have been active in this space (see prior discussions here and here). Fintechs should closely monitor enforcements like this matter and how the new administration approaches these issues.
