Unlike FTC, Mulvaney’s CFPB Can Demand Civil Penalties for Misleading Students
WASHINGTON, D.C. — Yesterday, the Federal Trade Commission (FTC) announced a settlement with online student lender SoFi for misleading borrowers about how much money they would save by refinancing their student loans through the company. In doing so, one of FTC Commissioners noted the Consumer Financial Protection Bureau (CFPB) could easily take up the case and use its power to demand civil fines from the abusive lender.
According to news reports, SoFi told borrowers they would save $300 a month on average if they refinanced with them although many borrowers eventually ended up paying more per month, just over shorter loan term. FTC Commissioner Rohit Chopra argued that, ideally, SoFi should pay a penalty for violating the law and that the CFPB could take action since the FTC has limited authority to pursue a fine against the company.
“Mick Mulvaney’s top priority at the CFPB should be investigating predatory companies like SoFi and holding them accountable to the fullest extent of the law. Student loan borrowers need to know the CFPB has their back. This isn’t the time for Mulvaney to do his usual song-and-dance with industry by curbing investigations, dropping enforcement actions, and watering down fines,” said Karl Frisch, executive director of Allied Progress.
He continued, “Mick Mulvaney has a long, well-documented history of going soft on predatory lenders. Industry is clearly growing accustomed to the ‘Mulvaney Discount.’ Rather than continuing down this anti-consumer path, Mulvaney should take heed of Commissioner Chopra’s comments and go after SoFi over their predatory practices targeting student loan borrowers.”
What You Need To Know
The FTC Reached A Settlement With Online Lender SoFi For Misleading Student Borrowers…
The Federal Trade Commission Found That SoFi, An Online Student Lender, Misled Borrowers By Telling Them They Could Save $300 A Month By Refinancing With Them
The Federal Trade Commission Settled With SoFi For Misleading Student Loan Borrowers. “The Federal Trade Commission announced Monday that it reached a proposed agreement with Social Finance, or SoFi, to settle claims made by the agency that for more than two years, the company misrepresented the average amounts borrowers would save by refinancing their loans with the company.” [Jillian Berman, “SoFi settles with FTC over claims it inflated the average amounts borrowers would save by refinancing,” MarketWatch, 10/30/18]
- SoFi Told Borrowers They Would Save $300 A Month On Loan Payments Although Many Of Them Actually Paid More Per Month. “The nearly $300 per month borrowers were told they would save on average excludes borrowers who refinanced into a loan with a shorter term than their initial loan, the FTC claims. Many of the borrowers excluded from the calculation actually pay more money per month, according to the agency.” [Jillian Berman, “SoFi settles with FTC over claims it inflated the average amounts borrowers would save by refinancing,” MarketWatch, 10/30/18]
…Although The FTC Could Not Issue A Penalty, An FTC Commissioner Argued That The CFPB Could Take Up The Case Because It Has The Power To Demand Fines From Abusive Lenders…
FTC Commissioner Rohit Chopra Argued That “Ideally,” SoFi Should Pay A Penalty For Deceiving Consumers And Noted That The CFPB Could Take Action In This Regard
- Although FTC Couldn’t Demand A Penalty From Sofi, FTC Commissioner Rohit Chopra Argued “Ideally, Sofi Would Pay Civil Penalties For Violating The Law” And That The CFPB Would Be Able To Take Stronger Enforcement Action. “Our proposed resolution does not require SoFi to pay any money whatsoever for this misconduct. Ideally, SoFi would pay civil penalties for violating the law. Due to limitations in the FTC’s authority, the agency cannot seek civil penalties in matters like these. However, the Consumer Financial Protection Bureau and the State Attorneys General would be able to seek penalties from SoFi under existing federal law. ” [“Statement of Commissioner Rohit Chopra,” Federal Trade Commission, 10/29/18]
…But Mulvaney Cannot Be Trusted To Stand Up Against Lenders Like SoFi
CFPB Acting Director Mick Mulvaney Has A History Of Going Light On Predatory Lenders, Most Recently Reducing A Penalty Against A Payday Lender By $2.8 Million
In October 2018, Mick Mulvaney Handed Out A $200,000 Fine To A Payday Lender. “Mick Mulvaney, the head of the U.S. Consumer Financial Protection Bureau (CFPB) on Wednesday fined a payday lender $200,000 for wrongly hounding borrowers but the penalty fell short of the $3 million his predecessor was seeking, said three sources familiar with the move.” [Patrick Rucker, “U.S. consumer watchdog dilutes penalty against payday lender,” Reuters, 10/24/18]
- The Fine Was $2.8 Million Less Than The One Mulvaney’s Predecessor Had Sought For The Same Company. “But while Mulvaney, the top cop for U.S. consumer finance, ordered the company to pay a $200,000 penalty for misleading customers and other abuses, his predecessor Richard Cordray had wanted to fine the payday lender $3 million, according to the sources. Since taking office in November, Mulvaney has diluted fines against several lenders that he determined had broken the law.” [Patrick Rucker, “S. consumer watchdog dilutes penalty against payday lender,” Reuters, 10/24/18]
- The CFPB Found, Among Other Things, That The Company Had “Abusively” Withheld Funds During Check-Cashing Transactions. “The Bureau found that Cash Express violated the Consumer Financial Protection Act (CFPA) by deceptively threatening in collection letters that it would take legal action against consumers, even though the debts were past the date for suing on legal claims… The Bureau also found that Cash Express violated the CFPA by abusively withholding funds during check-cashing transactions to satisfy outstanding amounts on prior loans, without disclosing this practice to the consumer during the initiation of the transaction.” [Press Release, “Bureau of Consumer Financial Protection Settles with Cash Express,” Consumer Financial Protection Bureau, 10/24/18]
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