- MoneyLion violated the Military Lending Act (MLA) by imposing illegal and excessive charges on service members and their families, according to a lawsuit filed Thursday by the Consumer Financial Protection Bureau (CFPB).
- The regulator alleges the neobank charged more than the legally allowable 36% rate cap on loans to service members, through a combination of stated interest rates and membership fees.
- The New York City-based fintech required customers to join a membership program to access its low annual percentage rate (APR) installment loan product, but failed to allow members to cancel their memberships until their loans were paid, the CFPB said.
“MoneyLion targeted military families by illegally extracting fees and making it difficult to cancel monthly subscriptions,” CFPB Director Rohit Chopra said in a statement. “Companies are breaking the law when they require monthly membership fees to obtain loans and then create barriers to canceling those memberships.”
The fintech imposed membership fees on covered borrowers that, when combined with loan-interest-rate charges, exceeded the MLA’s 36% rate cap, the bureau said.
“MoneyLion deceived these borrowers by representing that they owed loan payments and fees that they did not actually owe because the loans were void under the Military Lending Act,” the regulator said in a statement.
To access the low APR products, the neobank required consumers to join its membership programs and pay monthly membership fees of $19.99 to $29, the bureau said.
Despite claims that consumers could cancel at any time, MoneyLion refused customers’ requests to cancel memberships and stop paying fees if they had outstanding loan balances, the CFPB said.
“In some cases, MoneyLion refused to cancel memberships after loan payoff if consumers had any unpaid membership fees,” the agency said.
MoneyLion disputed the CFPB’s claims in a statement Thursday, and accused the regulator of taking a “sensationalist route of prioritizing headlines instead of engaging in constructive dialogue.”
“We will vigorously defend against these false allegations to set the record straight as we continue to deliver innovative financial products that help our customers,” MoneyLion said, adding that its membership offering represents a small subset of the company’s business.
In the lead-up to its $2.4 billion public listing last year, MoneyLion disclosed in June 2021 that the CFPB sent civil investigative demands in three successive years — 2019 through 2021 — concerning its membership model and the company’s compliance with the MLA.
MoneyLion said Thursday it has cooperated “in good faith” with the CFPB for more than three years regarding the membership offering.
“MoneyLion has the highest regard for its military and veteran customers and are committed to working with this important community to help them achieve better financial health,” the company said. “MoneyLion is honored to serve this important segment of its customer base and is grateful for the sacrifice these men and women have made for our country.”
In the complaint, the CFPB said it is “seeking monetary relief for consumers, disgorgement of unjust gains, an end to MoneyLion’s unlawful practices, and a civil money penalty.”
The enforcement action is the fourth related to violations of the MLA issued by the CFPB in the past two years, the bureau said.