A leading online payment system platform that offers point-of-sale (POS) financing reports, it received a Civil Investigation Request (CID) from the Consumer Financial Protection Bureau (CFPB) for allowing educational institutions to encourage students to finance their educational services using the point-of-sale lending platform. We explain its meaning below.
The company in question disclosed that it had received a CID from the Consumer Financial Protection Bureau regarding “the marketing and use of [its point-of-sale credit product] in connection with certain traders who provide educational services.
The disclosure comes after consumer groups accused the company of predatory financial practices for allegedly promoting its loan product online as a method of student borrowing at for-profit schools.
The advocacy group says the lender puts student borrowers at risk of serious financial harm by using deceptive marketing, charging sky-high interest rates and late fees that far exceed the most expensive federal student loans, and using aggressive collection practices that increase costs and aggravate harm. to students.
Why is this important
This is probably the first of several major initiatives that the CFPB is expected to launch in the area of student loans. More generally, short-term finance and point-of-sale finance companies are likely to face increased regulatory oversight under the Biden administration and should exercise caution when allowing educational institutions to use their platforms. . Federal and state regulators have increasingly focused on deceptive and abusive student loan practices in the wake of increasing student loan defaults, and new state laws have broadened the definition of a loan student and imposed a patchwork of licensing requirements for student loan services that impose a variety of requirements. with respect to the granting, servicing and collection of student loans. Manatt has a leading practice in student loan law and currently advises his clients on these matters. For more information, contact the authors or one of the Manatt Financial Services team.