CFPB takes Dodd-Frank UDAAP action against lead aggregator

On September 6, 2017, the Consumer Financial Protection Bureau (CFPB) announced its consent order (Order) against Zero Parallel, LLC, a lead aggregator (Aggregator), for alleged violations of the Unfair, Deceptive, or Abusive Acts or Practices section of the Dodd-Frank Act (UDAAP). The CFPB concurrently announced a proposed order (Proposed Order) against the President and primary individual owner of the Aggregator, who the CFPB previously sued in connection with a similar order against another aggregator, T3Leads (T3). The proposed order would resolve that lawsuit as well.

In the Order, the CFPB alleges that the Aggregator engaged in an abusive act or practice under UDAAP. An act or practice is considered “abusive” if it “takes unreasonable advantage of . . . a lack of understanding on the part of the consumer of the material risks, costs, or conditions of a product or service" (12 U.S.C. 5531(d)(2)(A)). According to the CFPB, the Aggregator accepted consumer leads from lead generators (Generators) then sold the leads to lenders that the Aggregator likely knew, or should have known, would make loans that were unenforceable under state licensing and/or usury laws (Applicable Laws). This practice resulted in consumers entering into void payday and installment loans, according to the CFPB. The Order also highlights that consumers were not informed of the process by which their information was shared with particular lenders; that is, through the Aggregator then to the (highest) paying lender.

The CFPB’s Order requires the Aggregator to use reasonable efforts to ensure leads it sells will not result in unenforceable loans under Applicable Laws and to keep records to evidence compliance with this requirement, including copies of relevant lenders’ licenses. In addition, the Aggregator must create processes to review loans resulting from the lead sales, and to develop and implement a policy that prohibits purchasing lenders from making void loans under Applicable Laws.

The Proposed Order against the owner and President of the company requires the Aggregator to review the content of Generators’ consumer-facing ads to ensure information provided is not misleading, inaccurate or false. The Aggregator must also require Generators to prominently disclose how the leads are being used by the Aggregator.

Key takeaways

UDAAP is alive and well. This action echoes part of the CFPB’s 2015 order against T3 for similar practices and the aggregator’s purported failure to vet and monitor lead sources. For entities that purchase leads, the Order serves as a reminder that the CFPB expects diligence of lead sources and the representations made in their advertisements. The CFPB also expects consumer financial services companies to make customers aware of how their information is being used because certain use could result in a potentially unfavorable outcome for the consumer.

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