“There is nothing new under the sun.” This is from Ecclesiastes, so why should we disagree? Therefore, even as innovative products enter the market – such as new platforms for the provision of financial services – the basic consumer protection principles remain the same. As demonstrated by the FTC’s $3.85 million settlement with Avant, LLC, this includes representations and practices related to online lending.
dedication Avant offers unsecured installment loans to consumers marketing Provide services for collection of payments. The FTC complaint alleges that Avant engaged in deceptive and unfair practices at multiple key stages of the process.
You’ll need to read the seven-alleged complaint to get the full picture, but here are some of the practices being challenged as illegal. One of the FTC’s concerns is that Avant persisted in using illegal payment methods, which violated regulations that ensure borrowers have the right to control which bills are paid and when. As a condition of receiving credit, Avant requires consumers to agree to automatic payments from their bank accounts—a check created remotely or a preauthorized electronic funds transfer. However, some of Avant’s transactions with consumers are subject to the Telemarketing Sales Rules, which expressly prohibit the use of remotely created checks. Avant’s insistence on preauthorized electronic funds transfers as the only alternative to illegal remote creation of checks violates the Electronic Funds Transfer Act, which prohibits credit restrictions on that payment method. These protections are critical for consumers to maintain their ability to prioritize paying their bills each month. By requiring consumers to agree to repay their loans through recurring bank account debits each month, Avant unlawfully took away consumers’ control over which bills were paid and when.
Avant also tells people that after completing their loan application, they can change their payment method to “any other reasonable payment method, including but not limited to paper check, money order, debit or credit card,” which can even be listed on its website. Check out the credit and debit cards it accepts. But in many cases, Avant refuses when consumers try to pay via credit or debit card. Consumers who originally relied on Avant representatives and planned to pay off their loans early with their credit cards were forced to continue using their Avant loans, accruing additional interest.
The FTC says even people who pay by check or money order will run into problems using Avant. In some cases, the company had to wait days or even weeks for consumers’ checks to be deposited into their accounts, according to the complaints. The result: Avant charged consumers late fees and interest they shouldn’t owe. The lawsuit alleges that Avant failed to implement routine mail processing controls, such as date stamping payment envelopes upon receipt, even after the company received complaints from consumers about mishandled checks.
The company also claimed that people could pay off their loans early without penalty, but some consumers reported being deceived. Because Avant charges daily simple interest on its loans, it’s difficult for consumers to accurately calculate the final repayment amount, as it will depend on the exact date of their payment. Therefore, consumers call Avant, contact them via email or through Avant’s online tools to find out the calculated payment amount. But even after consumers received an email or verbal confirmation from Avant that their loan was paid off, the company would ask again — sometimes months later — claiming the repayment quote was in error. The FTC said Avant charged consumers additional fees and interest, and even reported to credit bureaus that loans were delinquent after consumers paid the quoted payment amounts.
The lawsuit also accuses Avant of charging consumers’ credit cards or taking money from their bank accounts without their permission or in amounts greater than authorized. Sometimes Avant charges recurring payments. One unfortunate consumer’s monthly payment was deducted from his account eleven times in one day. Another person called Avant’s customer service number to try to reduce his monthly payment, only to be charged the entire balance. In other cases, Avant charged consumers’ payment balances twice. One consumer was left with overdraft charges and angry creditors when Avant withdrew her monthly payment three times in one day. Despite hundreds of consumer complaints about unauthorized charges and internal documents acknowledging problems, Avant continued to charge people without authorization, according to the lawsuit.
The settlement in the case awarded $3.85 million, which will be refunded to consumers harmed by Avant’s illegal conduct. The order also includes injunctive provisions prohibiting various deceptive and unfair practices alleged in the complaint.
What are the key takeaways for others in the industry? Online lending may be relatively new, but unauthorized payments and untrue claims have been around for far too long. If 21st century financial platforms abandon the misguided practices of the 20th century, consumers will benefit and, in the long run, businesses will benefit as well.
