Last week, the Consumer Financial Protection Bureau entered into a consent order with a lead aggregation company, Zero Parallel, and its CEO.
The bureau alleges that Zero Parallel violated the “unfair, deceptive, or abusive acts or practices” provisions of the Consumer Financial Protection Act . The consent order is the latest in a recent trend of CFPB actions that target not just lenders, but the entities found to be “substantially assisting” lenders who run engage in UDAAP violations.
Zero Parallel is a lead aggregator. They collect information consumers enter into various websites when shopping for payday or installment loans. Zero Parallel then transmits the information to various online lenders which evaluate the consumers’ information, eventually deciding whether or not they want to offer the loans. If they do, the lenders purchase the leads from Zero Parallel and interact directly with consumers to complete the loan transactions.
Though Zero Parallel is not a lender, the CFPB argued that they provide a “material service” to “covered persons” under the CFPA. According to the CFPB, lenders who purchased leads from Zero Parallel offered loans on terms that were prohibited in the states where the consumers resided due to issues with state licenses and interest rate limits. The CFPB claims that such loans were therefore void.
Because Zero Parallel allegedly knew that the leads it sold were likely to result in void loans, the CFPB alleges that Zero Parallel engaged in abusive acts and practices. The bureau claims that consumers who applied for loans through Zero Parallel’s network had no control over which lenders received their applications.
“Zero Parallel steered consumers toward payday and installment loans that were a bad deal,” said CFPB Director Richard Cordray. “We’re ordering Zero Parallel and its owner…to stop these illegal abusive practices.”
Under the terms of the consent order, Zero Parallel “must undertake reasonable efforts to ensure” that the loan leads it sells do not result in consumer loans that are void under the laws of the consumer’s state of residence. In addition, the company is required to pay $100,000 into the Consumer Bureau’s Civil Penalty Fund. In a separate action, Zero Parallel’s CEO is personally required to pay $250,000 for his leading role in the alleged infractions.