The Consumer Financial Protection Bureau has issued its first enforcement lawsuit of the Mulvaney era. Though the bureau has continued its enforcement activities via settlements and consent orders in recent months, this action against Future Income Payments is the first time under Mulvaney’s leadership that a regulated entity has been sued. Ten such lawsuits were filed in the same time span under previous leadership.
Future Income offers lump-sum payments to pensioners in exchange for ongoing payments. Though Future Income characterized their product as “pension advances,” the CFPB alleges that the product is a loan and therefore Future Income is a lender, subject to bureau regulation. The CFPB complaint alleges the company charged effective interest rates of up to 183% on cash advances of up to $60,000. According to the CFPB, Future Income told customers these were not loans, that there was no interest rate and that the company’s cash advances were cheaper than credit cards.
“In fact, defendants’ product is a loan and is more costly than alternative financial products,” the CFPB alleged.
The bureau alleged violations of the Consumer Financial Protection Act and the Truth in Lending Act. The company sought customers with advertisements, cold-calling, and email campaigns. They contacted those with a right to receive pension payments for a stated period of time, though some of the income streams that Future Income sought to access were not legally assignable. They claimed that their product was an advantageous way to pay off high-interest credit cards and other debts. They offered to “purchase” the pensioners’ future income at a “discount.”
In particular, the bureau said Kohn’s companies lured in “vulnerable consumers, including senior citizens, disabled military veterans and their spouses, who are in need of immediate cash.” Once a contact was made, the bureau alleges that Future Income representatives applied “significant pressure to consumers to quickly sign a contract.” It’s not clear how many borrowers the company had, but it claimed on its website to have completed more than $150 million in transactions, the complaint stated.
The CFPB is seeking injunctive relief, monetary and equitable relief, and civil money penalties. The bureau wants Future Income to reimburse customers as well. The allegations mirror ones already made by numerous state regulators in a dozen states. The CFPB has been investigating Future Income since at least 2016, when it ordered the companies to turn over financial records. The companies fought the order, arguing that the bureau is unconstitutional.