Consumer Financial Protection Bureau Sues Military Credit Services for Improper Contract Disclosures
The agency requires a $200,000 civil penalty in its second enforcement action against the lender
The Consumer Financial Protection Bureau (CFPB) is suing Military Credit Services (MCS) for a second time.
The agency filed this lawsuit over the lender's practice of making loans with improper disclosures. The company was sued by the States of North Carolina and Virginia as well as the CFPB in 2014 for similar violations, at which time MCS was ordered to revise its contract disclosures in 2015. Now the CFPB is ordering it to make sure that its contracts comply with the law, to hire a third-party consultant to review its practices, and to pay a civil penalty of $200,000.
"Today's action sends a clear message that lenders cannot ignore their responsibilities under the law," said CFPB Director Richard Cordray. "This is the Consumer Bureau's second action against Military Credit Services for improper disclosures. We are imposing further penalties, and we will continue to closely monitor their compliance in the future."
MCS extends credit to consumers through retailers across the country. It also collects debts owed under credit contracts through a commonly-owned company. The CFPB determined that MCS broke federal law by not properly disclosing the terms of transfers authorized in advance as well as interest rates on its loans. Consumers cannot make informed decisions about important financial matters without these disclosures, which are required by law.
The CFPB is authorized by the Dodd-Frank Act to take action against any institution carrying out unfair, deceptive, or abusive acts or practices or that breaks federal consumer financial laws in any other way.
MCS must do the following under the CFPB's order:
- Stop unlawful conduct. The company must make sure that its contracts comply with the law.
- Pay for an independent review. MCS has to hire an independent consultant who has specialized experience with consumer-finance compliance to carry out an independent review of how it issues and services credit. The independent report will be given both to MCS and to the CFPB.
- Pay a $200,000 civil penalty. The company has to pay $200,000 to the CFPB's Civil Penalty Fund.