The online lender, MoneyLion, allegedly refused to cancel memberships and required members to pay overpriced fees that exceeded the Military Lending Act’s cap.
10/04/2022 2:30 P.M.
3 minute read
The Consumer Financial Protection Bureau sued MoneyLion Technologies, an online lender, and 38 of its subsidiaries last week for imposing illegal and excessive charges on servicemembers and their dependents.
MoneyLion, based in New York City, is a financial technology company that offers online installment loans and other products. MoneyLion requires customers to join a membership program and pay monthly membership fees to access what it markets as its “low-APR” installment loan product.
The CFPB alleges that MoneyLion violated the Military Lending Act by charging more than the legally allowable 36% rate cap on loans to service members and their dependents through a combination of stated interest rates and monthly membership fees.
The Military Lending Act protects active duty service members and their dependents, including by limiting the annual percentage rate applicable to credit extended to service members and their dependents to 36%. The CFPB also alleges MoneyLion violated the Consumer Financial Protection Act and required customers to join a membership program to access certain “low-APR” loans, and then did not allow them to cancel their memberships until their loans were paid.
This is the CFPB’s fourth enforcement action related to the Military Lending Act in the past two years.
“MoneyLion targeted military families by illegally extracting fees and making it difficult to cancel monthly subscriptions,” said CFPB Director Rohit Chopra. “Companies are breaking the law when they require monthly membership fees to obtain loans and then create barriers to canceling those memberships.”
Specifically, MoneyLion allegedly harmed consumers by:
- Overcharging and deceiving service members and military dependents: MoneyLion imposed membership fees on covered borrowers that, when combined with loan-interest-rate charges, exceeded the Military Lending Act’s 36% rate cap. MoneyLion deceived these borrowers by representing that they owed loan payments and fees that they did not actually owe because the loans were void under the Military Lending Act.
- Refusing to allow customers to exit its membership programs and stop paying monthly fees: To access what MoneyLion markets as its “low-APR” installment loan, the company required consumers to join its membership programs and pay monthly membership fees, which ranged from $19.99 to $29. MoneyLion falsely led many consumers to believe that they could cancel their memberships at any time. In fact, MoneyLion refused customers’ requests to cancel memberships, and to stop paying membership fees, if they had outstanding loan balances. In some cases, MoneyLion refused to cancel memberships after loan payoff if consumers had any unpaid membership fees.
Under the Consumer Financial Protection Act, the CFPB has the authority to take action against companies that violate consumer financial protection laws, including engaging in unfair, deceptive, or abusive acts or practices. The CFPB also has the authority to enforce the Military Lending Act’s protections for service members and their dependents.
The CFPB is seeking monetary relief for consumers, disgorgement of unjust gains, an end to MoneyLion’s unlawful practices and a civil money penalty.
The complaint is not a final finding or ruling that the defendants have violated the law.
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