The bureau filed a lawsuit this month against the lease-to-own finance company, alleging deceptive practices that harmed consumers, including misleading advertisements, hidden terms and illegal debt collection tactics.
07/21/2023 12:55 P.M.
2 minute read
The Consumer Financial Protection Bureau has taken legal action against Snap Finance, a lease-to-own finance company, for allegedly engaging in deceptive practices that negatively impacted consumers, according to a July 19 press release from the bureau.
The lawsuit, filed in federal court, accuses Snap Finance of luring consumers into costly financing agreements through misleading advertisements, inadequate disclosures and obfuscation of terms and conditions. The CFPB further alleges that the company used false threats in collections and misrepresented consumers’ payment obligations.
Based in Utah, Snap Finance partners with thousands of merchants nationwide to provide “rental-purchase” or “lease-purchase” agreements for products and services like furniture, appliances, auto parts and jewelry.
The CFPB claims that Snap Finance’s practices violated several federal consumer financial laws, including the Consumer Financial Protection Act, Truth in Lending Act, Electronic Fund Transfer Act and Fair Credit Reporting Act.
The alleged misconduct began with deceptive advertising practices that misled consumers into agreeing to financing arrangements without fully understanding the true costs involved. Consumers were often led to believe they had entered into a 100-day financing agreement when, in fact, they were automatically enrolled in 12-month payment plans with exorbitant charges.
Snap Finance’s lack of transparency continued as it obscured the terms and conditions of its financing agreements, causing confusion about payment obligations. Merchants, using a tablet-based system provided by Snap Finance, often signed agreements on behalf of consumers without proper review, and consumers were required to pay a fee before seeing the terms of the agreement. Additionally, the company failed to provide necessary disclosures about the cost of credit, further disadvantaging consumers.
“Snap Finance illegally obscured terms and conditions of their so-called ‘rental purchase agreements,’ which led to exorbitant charges,” said CFPB Director Rohit Chopra. “To ensure fair competition and to protect the public, the CFPB is carefully watching lending outfits operating outside of the traditional banking system.”
Snap Finance also allegedly made false and misleading statements about consumers’ rights under the financing agreements, discouraging them from terminating agreements or surrendering merchandise. Additionally, the company engaged in illegal debt collection practices, threatening actions and misrepresenting payment obligations, even targeting borrowers who had already fulfilled their payment responsibilities.
The CFPB’s enforcement action seeks monetary relief for affected consumers, an end to Snap Finance’s unlawful practices and a civil money penalty.