CFPB fines GreenSky over fraudulent loans

The Consumer Financial Protection Bureau issued a consent order against GreenSky, LLC, alleging the Atlanta company enabled contractors and other merchants to take out loans on behalf of thousands of consumers who did not request or authorize them.

The Consumer Financial Protection Bureau issued a consent order against GreenSky, LLC, alleging the Atlanta company enabled contractors and other merchants to take out loans on behalf of thousands of consumers who did not request or authorize them.

GreenSky used merchants, primarily those providing home improvements, to promote and offer financing to customers before making on-the-spot lending decisions based on criteria provided by its partner banks. Proceeds from GreenSky’s loans bypass consumers and are disbursed directly to merchants following the merchants’ application for payment. Loan amounts range from a few thousand to tens of thousands of dollars.

According to the complaint, Greensky engaged in unfair practices in violation of the Consumer Financial Protection Act of 2010. Specifically, the company serviced and facilitated the origination of loans to consumers who did not request or authorize them. Between 2014 and 2019, GreenSky received at least 6,000 complaints from consumers who stated they did not authorize submission of a loan application. The company’s complaint investigations found that in at least 1,600 instances its merchants were at fault.

Greensky also failed to create and implement appropriate and effective controls during the loan application, approval, and funding processes, failed to implement adequate merchant training and oversight, and neglected to effectively manage consumer complaints, the bureau said.

The consent order requires the company to refund or cancel up to $9 million in loans for customers harmed by its illegal conduct, pay a $2.5 million civil penalty, and implement new procedures to prevent future fraudulent loans.

“GreenSky’s careless business and customer service practices enabled its merchants to take advantage of vulnerable consumers who needed financial help to repair their homes and to pay for other critical retail services by setting up loans without consumers’ consent,” said CFPB Acting Director Dave Uejio. “For consumers to wind up in debt to GreenSky for loans they never knew about is simply wrong. The CFPB will not stand for practices that allow conduct like this in the marketplace.”

Fredrikson & Byron Law