The post-Kraninger Consumer Financial Protection Bureau announced its first enforcement action yesterday, and while it might not directly relate to the accounts receivable management industry, there are a number of insights that the industry can and should glean from the news.
In conjunction with the Attorneys General of Virginia, New York, and Massachusetts, the CFPB filed a lawsuit against Libre by Nexus, accusing it of violating the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by engaging in deceptive and abusive acts that “deceive[d]” non-English speaking individuals into signing contracts and then using “illegal tactics” to collect on the fees it was owed. The contracts were signed by individuals in federal detention centers awaiting resolution of their immigration cases. The individuals, according to the complaint, are coerced into signing contracts that allegedly secure bonds for them to be released. In fact, according to the complaint, the fees are actually paid to rent GPS-tracking ankle monitors units that are worn until the case is resolved. The fees, unlike a bond, are never returned to the individual. Individuals with a $10,000 bond who wait three years for their case to be resolved would pay $17,000 in fees, according to the CFPB.
When the fees are not paid, the company would allegedly threaten individuals with deportation or imprisonment, or that the accounts would be sent to collection or reported to the credit bureaus.
The case demonstrates what Acting Director Dave Uejio has been saying since he replaced Kathleen Kraninger at the CFPB last month. In some of the first remarks he made as Acting Director, Uejio listed racial equity as a priority for the CFPB moving forward. The press release announcing the lawsuit specifically mentioned that the CFPB is “prioritizing the case to send a strong signal that financial scams targeting communities of color will not be tolerated.”
Uejio did not pull any punches in the press release, saying the CFPB believes that Libre “was a wolf in sheep’s clothing.” One report noted that this was the first time since Cordray left the CFPB that the agency used the word “scam” in a press release.
Libre’s CEO Mike Donovan defended the company’s actions, according to a published report. “Libre is proud of its work and believes sunlight is the best disinfectant,” Donovan said in a statement. “We plan to vigorously defend this suit and prevail at trial.”