Estimated read time: 2-3 minutes
This archived news story is available only for your personal, non-commercial use. Information in the story may be outdated or superseded by additional information. Reading or replaying the story in its archived form does not constitute a republication of the story.
WASHINGTON (AP) — Federal regulators sued four online lenders for collecting consumer debts they weren't legally owed, an area that is a prime source of consumer complaints.
The Consumer Financial Protection Bureau filed the suit Thursday against the lenders, saying they illegally took money from consumers' bank accounts for debts that weren't valid because loans violated state laws. It says the high-cost online loans, with annual interest rates from 440 percent to 950 percent, violated licensing requirements or interest-rate caps, or both, making them void in at least 17 states.
The four lenders, Golden Valley Lending, Silver Cloud Financial, Mountain Summit Financial and Majestic Lake Financial, are owned by the Habematolel Pomo Tribe, an American Indian tribe in Upper Lake in northern California.
The tribe disputed the allegations and said it would fight the suit. It argued that the agency has ignored the federal government's legal relationship with tribal governments: by law, tribes must be treated like a state. "The lawsuit would never have been filed in this manner against a state," Brant Bishop, an attorney representing the tribe, said in a statement.
The tribe had tried to show the CFPB why its business model fully complied with the law, but the agency responded by filing a "surprise lawsuit," Bishop said.
The companies "provide much-needed services to people across the United States," he said.
The CFPB is seeking an injunction against the companies as well as unspecified restitution for consumers and a fine.
In addition to collecting loan payments that weren't owed from customers' accounts and deceiving customers about them, the lenders also failed to disclose the annual interest rates on the loans on their websites, the CFPB said.
It said Golden Valley Lending and Silver Cloud Financial have offered loans over the internet of between $300 and $1,200 to consumers throughout the U.S. since 2012, while Mountain Summit Financial and Majestic Lake Financial started offering similar loans more recently.
The multibillion-dollar debt collection industry is a top source of complaints from consumers, according to the CFPB. The agency began collecting complaints in its public database system in mid-2013; by the end of that year, it had received more than 30,000 complaints about debt collectors. An estimated 70 million Americans are contacted by debt collectors each year.
The most frequent complaints were about debt collectors attempting to gather money that wasn't owed.
Last July, the CFPB proposed rules to change the way the industry does business. Consumers could no longer receive multiple calls per day from debt collectors and would have more ability to dispute their bills. Collectors would be required to have more documentation to prove a debt is owed.
Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
