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The Consumer Finance Protection Bureau (CFPB) has sued online lender MoneyLion, along with 38 of its subsidiaries, over allegedly imposing illegal charges for service members and dependents, a report from ConsumerFinance.gov said.
According to the CFPB, MoneyLion violated the Military Lending Act by charging more than the legal 36% rate cap on loans for servicemembers and dependents.
MoneyLion also allegedly made customers join a membership program to access various “low-APR” loans, not letting them cancel their memberships until the loans were paid.
MoneyLion is a New York City-based financial technology company offering online installment loans and other products. The company makes customers join a MoneyLion membership program and pay monthly fees to access what it says are “low-APR” installment loan products.
The CFPB said MoneyLion’s practices went against the Consumer Financial Protection Act and the Military Lending Act, which protects active-duty servicemembers and their dependents, including by limiting the annual percentage rate extended to servicemembers and dependents to 36%.
“MoneyLion targeted military families by illegally extracting fees and making it difficult to cancel monthly subscriptions,” CFPB Director Rohit Chopra said. “Companies are breaking the law when they require monthly membership fees to obtain loans and then create barriers to canceling those memberships.”
In August, MoneyLion also partnered with financial literacy company Zogo to help add more financial education services for MoneyLion’s customers.
Zogo is an app-based financial education tool which founders have described as akin to a Rosetta Stone language course, but for personal finance, allowing for a breakdown of bigger topics in finance.
The partnership will let MoneyLion users access Zogo’s “bite-sized” educational modules.
“The partnership offers an essential blend of holistic and technological innovation that for many years has been left out of the banking and education industries,” the companies said in a news release Aug. 15. “This is Zogo’s largest integration with a Fintech platform since its conception in 2018.”
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