CFPB Reaches $200,000 Settlement with Online Retailer and Lender

On October 4, 2018, the Consumer Financial Protection Bureau (CFPB) announced that it had entered into a consent order with online retailer and its subsidiaries that sells products through revolving-credit accounts and installment-credit accounts, and then sells charged-off account to third-party debt collectors. The consent order resolves the CFPB’s allegations that the retailer violated the Consumer Financial Protection Act (CFPA) by substantially delaying the transfer of payments it received from consumers on charged-off accounts to the third-party debt buyers who had purchased and were attempting to collect the debts.

According to the CFPB, the retailer would sometimes receive payments on credit accounts they had charged off even after the debts were sold. Due to operational errors, the CFPB alleged that the retailer would substantially delay forwarding these payments to the debt buyers who had purchased the accounts.  The CFPB found that since 2013, there have been over 3,500 instances where the delay in forwarding the payment exceeded 365 days, and 18,000 payments where the delay exceeded 31 days.  The CFPB alleged that this failure potentially subjected consumers to misleading debt collection practices or inaccurate credit reporting, and charged the retailer with engaging in “unfair” practices under the CFPA.

The consent order requires the retailer to improve its processes to ensure payments are forwarded in a timely manner, to prevent accepting such payments in the first instance, and to notify customers who make payments on sold accounts that their accounts have been sold. The retailer also agreed to pay a civil money penalty of $200,000.

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