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Lender Runs Afoul of Military Lending Act; Agrees to Pay $2 Million Fine to CFPB

  • The Consumer Financial Protection Bureau (“CFPB”) reached a settlement with consumer lender Omni Financial of Nevada, Inc. (“Omni”) to resolve allegations that it used prohibited collection practices in its dealings with consumers affiliated with the military as well as civilians in violation of the Military Lending Act (“MLA”), the Electronic Fund Transfer Act (“EFTA”), and the Consumer Financial Protection Act (“CFPA”).
  • According to the consent order, the CFPB found that Omni violated the MLA by offering loans to active-duty servicemembers and their dependents that required repayment by allotment, a system that allows servicemembers to designate the payment of a portion of their paychecks to specific recipients. The MLA prohibits lenders from extending credit to servicemembers if the lender requires repayment by allotment. In addition, the CFPB found that Omni violated the EFTA and the CFPA with its consumer loans to civilians by requiring prohibited preauthorized electronic fund transfers as a condition of extending credit to the borrower.
  • Under the terms of the consent order, Omni will pay a civil money penalty of $2.175 million and will be enjoined from continuing its illegal practices. In addition, Omni is required to provide notice to its military customers that they may change their repayment method from payment by allotment. It is also required to stop incentivizing its employees on the basis of signing up consumers who pay by allotment, among other things.