The Consumer Financial Protection Bureau sued lease-to-own consumer finance company Snap Finance for allegedly making false threats and obscuring the terms of its financing agreements.
The federal lawsuit, announced July 19 in a press release, alleges that Snap Finance provided millions of lease-purchase and rental-purchase financing agreements that harmed consumers through “misleading advertisements, insufficient disclosures, and interfering with consumers’ ability to understand the terms and conditions of its financing agreement.”
The CFPB is calling on Snap Finance to pay a fine to consumers and face a civil fine. Snap Financial partners with merchants across the United States to offer, market and underwrite consumers’ rental-purchase or lease-purchase agreements on products such as furniture and appliances, mattresses, auto parts and repairs, electronics and jewelry.
The Utah-based company allegedly used deceptive, aggressive marketing to lock consumers into expensive agreements, including by offering an “100-Day Cash Payoff” when customers had been instead automatically entered into 12 months of payments, “which typically involves total payments that amounted to more than double the cash price of the financed merchandise or service.
Snap Finance required merchants to provide the details of its financing agreements to consumers but allegedly did not provide written training materials to its merchant partners. Merchants allegedly signed and submitted consumer agreements without their review and didn’t provide consumers with required disclosures about annual percentage rates, finance charges and cost of credit.
“Snap Finance illegally obscured terms and conditions of their so-called ‘rental purchase agreements,’ which led to exorbitant charges,” said CFPB Director Rohit Chopra. “To ensure fair competition and to protect the public, the CFPB is carefully watching lending outfits operating outside of the traditional banking system.”
According to the CFPB, Snap Financial’s illicit conduct continued during the servicing of the consumer agreements by misrepresenting payment obligations and issuing false threats in collections — even to consumers who had already made their payments, were current on their payments or who had not received their purchase.
“Snap Finance’s internal training materials strongly discouraged employees from accepting consumer requests to surrender purchases, and employees routinely and falsely told consumers that purchases were not eligible for surrender,” the CFPB stated.
According to PYMNTS, a Snap Finance spokesperson said the company disagreed with the CFPB’s allegations. “We believe Snap Finance’s practices have been transparent and compliant with both the letter and spirit of the law,” the company said in a provided statement to the outlet. “Our customers are provided with clear summaries of their rights in our application flow and benefit from our best-in-class support. We pride ourselves on being the industry leader in terms of transparency and fairness through all stages of a customer’s relationship with Snap.”