CFPB Sues MoneyLion for Arbitration Clause Use
Posted on Categories Arbitration Agreements, CFPB, Consumer, Fed Arbitration Act, Non-Securities Arbitration, WaiverTags , , , ,

By George H. Friedman, SAA Publisher & Editor-in-Chief

The Consumer Financial Protection Bureau (“CFPB”) has sued online lender MoneyLion in federal court, asserting among other things that the lender’s use of predispute arbitration agreements (“PDAA”) violated the Military Lending Act (“MLA”).

The Complaint in Consumer Financial Protection Bureau v. MoneyLion Technologies Inc., No. 1:22-cv-08308 (S.D.N.Y. Sep. 29, 2022), states: “The Bureau brings this action to enforce the Military Lending Act’s protections for U.S. Military active-duty servicemembers and their dependents and to enforce the Consumer Financial Protection Act’s protections for all U.S. consumers. Defendants MoneyLion Technologies, Inc. and the MoneyLion Lending Subsidiaries overcharged servicemembers and their dependents— imposing fees that, together with stated interest-rate charges, exceeded the Act’s limit of 36% Military Annual Percentage Rate (MAPR). Defendants collected on these illegal loans and associated fees, failed to give requisite disclosures, and inserted illegal arbitration clauses designed to take away servicemembers’ ability to vindicate their rights in court.”

MLA Bars Mandatory PDAAs

The MLA (10 U.S.C. § 987(e)(3)) makes it unlawful where: “the creditor requires the borrower to submit to arbitration or imposes onerous legal notice provisions in the case of a dispute….” The corresponding regulation (32 C.F.R. § 232.8(c)) states: “Title 10 U.S.C. 987 makes it unlawful for any creditor to extend consumer credit to a covered borrower with respect to which ...[t]he creditor requires the covered borrower to submit to arbitration or imposes other onerous legal notice provisions in the case of a dispute.” The Complaint charges that:

“from about the fall of 2017 until at least August 2019, MLT and the MoneyLion Lending Subsidiaries made loans to covered borrowers by way of loan contracts requiring the borrowers to submit to arbitration in the case of a dispute, without exceptions for covered borrowers. MLT and the MoneyLion Lending Subsidiaries violated the MLA each time they made such a loan to a covered borrower.”

(ed: We’ll keep our eye on this one.)