CFPB Issues Consent Order; Fintech Lender to Pay $11M in Fines, Refunds to Consumers

The Consumer Financial Protection Bureau has entered into a consent order with a fintech company accused of originating loans to consumers without the proper authorization, fining the company $2.5 million and requiring it to cancel or refund up to $9 million in loans.

The company, GreenSky, was accused of working with merchants — namely home improvement contractors — to originate and collect on loans that were not requested or authorized by consumers. The lender worked directly with merchants, disbursing funds directly to them after the merchants submitted applications for payment. More than 6,000 complaints were filed during a five-year period about the company, with some consumers claiming to have never applied for a loan or hearing of the company prior to receiving billing statements and collection letters.

“GreenSky’s careless business and customer service practices enabled its merchants to take advantage of vulnerable consumers who needed financial help to repair their homes and to pay for other critical retail services by setting up loans without consumers’ consent,” said CFPB Acting Director Dave Uejio, in a statement. “For consumers to wind up in debt to GreenSky for loans they never knew about is simply wrong. The CFPB will not stand for practices that allow conduct like this in the marketplace.”

Along with processing and servicing unauthorized loans, the lender was also accused of failing to create and implement appropriate controls during the application process and failing to train merchants properly.

The company was accused of engaging in unfair acts and practices in violation of the Consumer Financial Protection Act. It was also accused of not disciplining or terminating merchants that were known to have submitted unauthorized loan applications and not responding to complaints in a timely manner.

Along with the refunds and the fine, the company will update its policies and procedures to “prevent future illegal practices by verifying consumers’ identities and confirming their authorizations prior to activating loans or disbursing loan proceeds,” the CFPB said in a release announcing the enforcement action. The lender must also “implement an effective consumer complaint management program, exercise effective oversight of third-party merchant partners, and implement consistent standards to govern the write-off of illegal loans.”

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