Feds allege online lender ‘overcharged and deceived’ troops and families
[Editor’s note: This story has been updated to include MoneyLion’s response to the federal lawsuit.]
Federal authorities are suing an online lender for allegedly overcharging and misleading service members and their families.
The Consumer Financial Protection Bureau filed the lawsuit Thursday in federal court in the Southern District of New York, against MoneyLion Technologies and 38 of its subsidiaries, including MoneyLion’s operations in 37 states.
The CFPB alleges that MoneyLion imposed “unlawful and excessive fees” on soldiers and their families, in violation of the Military Loans Act. Among other things, this law limits the amount of interest that can be charged to service members to 36% annual percentage rate, to include fees charged on loans.
But MoneyLion calls the CFPB’s claims “baseless” and said it “will vigorously defend itself against these false allegations to set the record straight”, in a response to the Military Times. Despite their cooperation with the CFPB for more than three years, they said: “The Bureau has chosen the sensationalist path of giving priority to headlines instead of engaging in constructive dialogue to answer their questions and obtain better results for consumers.
CFPB officials said it was the fourth enforcement action related to the Military Loans Act in the past two years.
According to the CFPB, since 2017, MoneyLion has been offering loans that consumers can only get if they enroll in a “membership program” and pay a monthly membership fee. They offered 12-month installment loans of $500, with an annual percentage rate of 5.99%. However, they also required customers to pay a monthly membership fee of $29, which works out to $348 over a year for a $500 loan.
“MoneyLion has targeted military families by illegally collecting fees and making it difficult to cancel monthly subscriptions,” CFPB Director Rohit Chopra said in an announcement of the lawsuit. “Companies are breaking the law when they charge monthly membership fees for loans and then create barriers to canceling those memberships.”
The CFPB’s claims about the membership offer “are baseless,” MoneyLion officials said in their statement to the Military Times, noting that the claim “is isolated from one of the company’s many product offerings. “.
“We will vigorously defend against these false claims to set the record straight as we continue to deliver innovative financial products that help our customers,” they said.
“MoneyLion has cooperated in good faith with the CFPB for more than three years regarding our membership offering. Our innovative membership program helps service members and other customers save, invest, build credit and improve their overall financial life.
“MoneyLion holds its military and veteran customers in the highest regard and is committed to working with this important community to help them achieve better financial health,” according to the statement. “MoneyLion is honored to serve this important segment of our customer base.”
MoneyLion’s customer service line includes an option to hear a recorded disclosure regarding the Military Loans Act. It advises customers that the law offers certain protections to service members and their families, with a cap of 36% on the annual percentage rate, to include costs associated with origination or application fees, annual interest and interest. other costs.
“Your current loan will consist of bi-weekly payments in equal amounts until the loan is repaid in full,” the recording reads. Further information was not available on whether a membership fee is still required.
CFPB officials declined to provide more information on how many service members and family members they say were affected by this, or how much the troops paid that exceeded the APR by 36 percent. .
“The Bureau filed a lawsuit in federal court seeking an injunction to end the alleged illegal conduct; remedies for affected consumers; the imposition of a civil monetary penalty; and other relief,” officials said in a statement provided to the Military Times.
“The filing of a lawsuit is not a finding or determination that the defendants violated the law, and no injunction, relief, civil monetary penalty or other remedy has been ordered.
“If the defendants are found liable, the amount of any restitution will be determined as part of the litigation in federal court.”
According to the lawsuit, MoneyLion customers were required to make loan repayments of approximately $43 each month; pay the $29 membership fee; and make a separate $50 monthly deposit into a MoneyLion-controlled investment account. CFPB alleges that MoneyLion showed in contracts that although customer memberships automatically renewed each month, consumers had the right to cancel their memberships for any reason. However, customers were not informed that they could not cancel their membership if they had an outstanding loan balance.
In some cases, MoneyLion refused to cancel memberships even after the loan was paid off because the consumer had unpaid membership fees, the CFPB alleges.
After MoneyLion began allowing some consumers to use funds from their investment account to repay loans, they had to be in “good standing,” according to the lawsuit. They would have to pay the outstanding membership fees before the company would allow them to use funds from their own investment account to repay the loan.
In 2019, MoneyLion changed the 12-month installment loan offered under the membership program, to an amount between $500 and $1,000, with an APR between 5.99% and 29.99%, according to the trial. To obtain the loan, customers had to join the membership program and pay a monthly fee of $19.99.
Karen has covered military families, quality of life and consumer issues for Military Times for over 30 years, and co-authored a chapter on media coverage of military families in the book “A Battle Plan for Supporting Military Families”. She previously worked for newspapers in Guam, Norfolk, Jacksonville, Florida and Athens, Ga.