FTC Sanctions Online Lender Avant
The Chicago company is to pay back borrowers $3.85 million due to "unlawful practices."
The Federal Trade Commission on Monday announced a $3.85 million settlement with Avant for overcharging borrowers and other “deceptive and unfair loan servicing practices.”
The FTC said Avant practices included imposing unauthorized charges on consumers’ accounts and unlawfully requiring consumers to consent to automatic payments from their bank accounts.
“We have alleged that Avant gave the run-around to consumers trying to repay their loans, because of systemic issues with the company’s loan servicing platform,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection.
“Online lenders need to understand that loan servicing is just as important to consumers as loan marketing and origination, and we will not hesitate to hold lenders liable for unfair or deceptive servicing practices,” Smith said.
Al Goldstein, CEO of Avant, issued a statement saying the company has been discussing these issues for months with the FTC.
“We’ve recently executed a mutually agreeable resolution to this matter,” Goldstein said. “We are pleased that this matter is resolved. Our focus and commitment have always been on providing our customers with transparent and complete information that helps them make smart financial choices and borrow money responsibly.”
Avant’s website says the company has a $4 billion loan portfolio and has served more than 600,000 customers.
The settlement order was filed with U.S. District Court for the Northern District of Illinois on Monday.
According to the FTC’s complaint, Avant falsely advertised that it would accept payments by credit or debit cards on consumer installment loans, when in many cases it rejected these forms of payments. The FTC also alleged that the company sometimes withdrew money from consumers’ accounts or charged their credit cards without authorization.
In some instances, Avant charged consumers duplicate payments without authorization twice or more in one month. “For example, one consumer’s monthly payment was debited from his account 11 times in a single day,” the FTC charged.
“In many cases when consumers complained about the unauthorized charges, Avant allegedly insisted that the consumers authorized the charges and refused to provide a refund,” the FTC said. “Despite hundreds of consumer complaints about unauthorized charges and internal documents repeatedly acknowledging this problem, the company continued to charge consumers without authorization.”
The FTC also charged the online lending company with the following law violations:
- failing to properly and timely credit payments made by check;
- providing inaccurate payoff quotes to consumers;
- collecting additional amounts even after consumers paid the quoted payoff amount; and
- violating the Telemarketing Sales Rule and the Electronic Fund Transfer Act by requiring borrowers to agree to recurring automatic debits of their bank account as a condition of obtaining a loan.
The stipulated final order imposes a judgment of $3.85 million, which will be returned to consumers who were harmed by Avant’s unlawful practices.
Avant’s website says its branded loans are issued by WebBank, an FDIC-member bank based in Salt Lake City with $871 million in assets as of March 31.
The FTC said WebBank is not a defendant in its action.
WebBank’s website says it now offers “two Avant-branded credit products to consumers through its partnership with Avant. WebBank is the originator of a closed-end, consumer installment loan. WebBank is also the issuer of a revolving, variable rate, general-purpose, consumer, MasterCard brand credit card.”
WebBank says both the consumer loan and credit card are serviced by Avant.
Avant’s website says its consumer loans range from $2,000 to $35,000, and carry APRs of 9.95% to 35.99%. Terms range from 24 to 60 months, and it charges an administration fee up to 4.75%.
For example, Avant says, “a $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.”