- MoneyLion violated the Military Loans Act (MLA) by imposing illegal and excessive fees on military personnel and their families, according to a trial filed Thursday by the Consumer Financial Protection Bureau (CFPB).
- The regulator alleges the neobank charged more than the legally permitted rate cap of 36% on loans to members of the service, through a combination of reported interest rates and membership fees.
- The New York-based fintech required customers to join a membership program to access its low annual percentage rate (APR) installment loan product, but did not allow members to cancel their memberships until their loans are paid, said the CFPB.
Overview of the dive:
“MoneyLion has targeted military families by illegally collecting fees and making it difficult to cancel monthly subscriptions,” CFPB Director Rohit Chopra said. said in a press release. “Companies are breaking the law when they charge monthly membership fees for loans and then create barriers to canceling those memberships.”
The fintech imposed membership fees on covered borrowers that, combined with interest charges on loans, exceeded the MLA’s 36% rate cap, the bureau said.
“MoneyLion misled these borrowers by saying they owed loan repayments and fees they didn’t actually owe because the loans were void under the Military Loans Act,” the regulator said in a statement. .
To access low-APR products, the neobank required consumers to join its membership programs and pay a monthly membership fee of $19.99 to $29, the bureau said.
Despite claims that consumers could cancel at any time, SilverLion rrefuse customer requests to cancel their membership and stop paying fees if they had outstanding loan balances, the CFPB said.
“In some cases, MoneyLion refused to cancel memberships after loan repayment if consumers had unpaid membership fees,” the agency said.
MoneyLion challenged the CFPB’s claims in a statement thursdayand accused the regulator of taking a “sensationalist course of prioritizing headlines instead of engaging in constructive dialogue”.
“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,” MoneyLion said, adding that its membership offering represents a small subset. business activities.
Looking ahead to its $2.4 billion public list last year, MoneyLion disclosed in June 2021 that the CFPB had sent civil inquiry requests in three successive years – from 2019 to 2021 – regarding its membership model and the company’s compliance with the MLA .
MoneyLion said on Thursday it had cooperated “in good faith” with the CFPB for more than three years regarding the membership offer.
“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,” the company said. “MoneyLion is honored to serve this important segment of its customer base and is grateful for the sacrifice these men and women have made for our country.”
In the complaint, the CFPB said it was “seeking monetary relief for consumers, restitution of unfair earnings, an end to MoneyLion’s illegal practices, and a civil monetary penalty.”
The enforcement action is the fourth related to MLA violations issued by the CFPB in the past two years, the office said.