Banking and Finance Law Daily Online lender Integrity Advance, CFPB file responses in administrative appeal
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Friday, December 9, 2016

Online lender Integrity Advance, CFPB file responses in administrative appeal

By Colleen M. Svelnis, J.D.

Online short-term lender Integrity Advance and the Consumer Financial Protection Bureau have filed responses to the initial briefs in the appeal of an administrative law judge’s (ALJ) Recommended Decision. The ALJ, Parlen L. McKenna, had recommended that Integrity Advance and its CEO pay more than $38 million in restitution to consumers who were allegedly deceived by the costs associated with the company’s short-term loans.

The Recommended Decision found that the lender violated: the Truth in Lending Act (TILA) by disclosing incorrect finance fees and annual percentage rates in its loan agreements; the Electronic Funds Transfer Act (EFTA) by conditioning its loans on repayment by electronic means; and the Consumer Financial Protection Act (CFPA) by violating its prohibition against deceptive acts or practices (see Banking and Finance Law Daily, Oct. 3, 2016).

Enforcement counsel arguments. The CFPB summarized the findings against Integrity Advance by outlining the charges. According to the enforcement counsel’s brief, the company and its CEO ran a payday loan operation that consistently violated federal law. The brief states that the company failed to accurately disclose the cost of their loans, forced consumers into electronic repayments, and, when consumers realized that they were being overcharged, the company continued to withdraw funds.

According to the brief, each of Integrity Advance’s loan agreements were deceptive. The loans appeared to be single-payment but Integrity Advance would instead continually automatically renew a consumer’s loan through an "auto renewal" and "auto workout" process, stated the brief.

Not retroactive. Integrity Advance’s brief states that neither Section 1055 of the CFPA nor other provisions of the statute applies retroactively, emphasizing that "the bureau cannot reach back and impose liability and seek remedies under the CFPA for conduct that occurred before the CFPA’s effective date."

It also asserted that to allow the retroactivity would render the effective date "meaningless" and to do so would violate Integrity Advance’s due process rights to attempt to reach conduct that occurred before July 21, 2011.

Additionally, Integrity Advance states that the enforcement counsel’s TILA, EFPA, and unfair, deceptive, or abusive acts or practices (UDAAP) claims are time-barred. If CFPA section 1055 has retroactive effect, the brief reasons that the statutes of limitations for TILA, EFPA, and UDAAP claims brought in district court also apply in the bureau’s administrative forum. According to Integrity Advance, this would mean that TILA and EFTA claims brought in this case would be limited to a one-year statute of limitations, which would bar the TILA and EFTA claims.

The brief alleges that the bureau’s enforcement counsel has failed to establish the timeliness of any of its claims and that the bureau cannot order restitution concerning any conduct that pre-dates July 21, 2011.

Companies: Integrity Advance, LLC; PHH Corporation

MainStory: TopStory CFPB ChecksElectronicTransfers CreditDebitGiftCards DoddFrankAct EnforcementActions Loans TruthInLending UDAAP

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