On September 29, 2002, the Consumer Financial Protection Bureau (“CFPB”) filed a complain against online lender MoneyLion Technologies, Inc, and several dozen of its subsidiaries (collectively, “MoneyLion”), alleging violations of the Military Lending Act (“MLA”). The lawsuit alleges that MoneyLion (i) overcharged service members and their dependents by imposing fees that, along with stated interest rates, exceeded the Military Annual Percentage Rate (“MAPR”) of 36% of the MLA , (ii) failed to provide required disclosures, and (iii) included arbitration clauses prohibited by the MLA. The Bureau further alleges that the service members became “locked in” to MoneyLion’s membership program after taking out their loans and were unable to cancel their membership, which required paying monthly dues, without first paying off their loans.

According to the CFPB, MoneyLion has offered loans since 2017 that consumers can access through its website and mobile app by signing up for membership programs and paying monthly membership fees. The CFPB alleges that MoneyLion told consumers for several years that they had the right to cancel their memberships for any reason, even though they had a policy that prohibited consumers with unpaid loan balances from canceling their memberships. Beyond that, the lawsuit alleges that, even after the loan was paid off, some consumers were unable to cancel their memberships until they paid back membership fees; that consumers were prohibited from repaying their loans using funds from MoneyLion investment accounts; and that MoneyLion sometimes refused to honor requests to stop ACH withdrawals of membership fees even after memberships were cancelled.

The MLA and its implementing regulations contain protections for service members and their dependents identified as “covered borrowers” at the origin of certain credit transactions, including installment loans of the type at issue in this case. These protections include the maximum MAPR, the prohibition on requiring arbitration, and mandatory loan disclosures. 10 USC § 987(b), (c), (e)(3); 32 CFR §§ 232.4(b), 232.6, 232.8(c). The complaint alleges violations of these limits and MLA requirements.

As detailed in the lawsuit, the Bureau alleges that the monthly membership fees charged by MoneyLion, generally $19.99 but as high as $29.00, pushed the MAPR of the installment loans, offered at APRs between 5.9% and 29.99%, above the MAPR of 36% of the MLA. limit. Under the MLA, participation fees are generally included in the calculation of the MAPR, even if that fee is excluded from the finance charge under Regulation Z. 32 CFR § 232.4(c)(1)(iv).

With respect to arbitration, the Bureau alleges that the loan agreements used by MoneyLion from fall 2017 through at least August 2019 required borrowers to submit to arbitration in the event of a dispute, with no exception for covered borrowers, in violation of 10 USC § 987(e)(3) and 32 CFR § 232.8(c). The Bureau alleges that, during that same period, MoneyLion failed to make certain disclosures before or at the time a covered borrower became obligated for a loan, including the mandatory disclosure of the MAPR. Under the MLA, creditors are required to disclose a “MAPR Statement” stating that federal law provides protections to members of the Armed Forces and their dependents in connection with consumer credit extensions, and that the cost of this credit cannot exceed an APR of 36%, including certain expenses and commissions. This disclosure must be provided in writing on a form that the borrower can keep and must also be provided orally (in person or through a toll-free number). 10 USC § 987(c), 32 CFR § 232.6.

The complaint also alleges causes of action under the Consumer Financial Protection Act of 2010 (“CFPA”), including deceptive acts and practices related to loan balances and membership dues and restrictions on cancellation of membership, unfair acts and practices related to the collection of membership fees. after consumer requests to cancel membership, and abusive acts and practices related to membership program loans. 12 USC §§ 5531, 5536(a).

Announcing the action against MoneyLionCFPB Director Rohit Chopra said: “MoneyLion targeted military families by illegally extracting fees and making it difficult to cancel monthly subscriptions. Companies break the law when they require monthly membership fees to obtain loans and then create barriers to cancel those memberships.”

The CFPB seeks monetary relief, restitution, or compensation to covered borrowers for unjust enrichment, civil money penalties, and a permanent injunction prohibiting practices alleged to violate the MLA and CFPA. According to the CFPB, this is its fourth MLA enforcement action in the last two years.

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