United States: You Can't Spell Fintech Without FTC

Last Updated: May 17 2019
Article by Edith Ramirez, Meghan Rissmiller and Olga Fleysh

The Consumer Financial Protection Bureau (CFPB) is not the only consumer watchdog keeping a close eye on the financial sector and certainly not the only agency focused on FinTech. This is also a key area for the Federal Trade Commission (FTC).

FinTech provides an exciting array of financial products and services that benefit consumers. From online lending to payment apps, these technologies offer consumers fast and convenient access to financial services. But companies providing new and innovative digital products cannot take shortcuts when it comes to complying with traditional consumer protection principles without risking catching the attention of the FTC.

In this post, we describe several recent FTC actions highlighting key enforcement issues facing FinTech companies. Importantly, companies should keep in mind that basic consumer protection principles continue to apply in the new economy.

The FTC's authority

The FTC has a dual mission to protect consumers and promote competition. The primary consumer protection law enforced by the FTC is Section 5 of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair and deceptive acts or practices. The FTC also enforces a number of other consumer protection statutes governing financial-related activity, including (among others) the Graham-Leach-Bliley Act, Truth in Lending Act, Fair Debt Collection Practices Act, and Fair Credit Reporting Act.

In the financial arena, the FTC and the CFPB share oversight over businesses that offer consumer financial products and services, except that the FTC's jurisdiction does not extend to banks, thrifts, federal credit unions, and others that are exempt under the FTC Act. In light of their concurrent jurisdiction, the two agencies cooperate and work to avoid duplication of effort, as documented in a memorandum of understanding.

The FTC has focused its efforts on, among other areas: debt collection, mortgage, credit card, student, and other debt relief services; short term lending; auto sales; financing and leasing; and FinTech.

Recent FTC enforcement actions in FinTech

In recent years, with the increasing role of technology, the FTC has paid particular attention to FinTech. These are some of the matters in which the FTC has taken action.

Avant LLC

On 15 April 2019, the FTC announced a US$3.85 million settlement with online lender Avant LLC, resolving charges that the company had engaged in deceptive and unfair loan servicing practices in violation of Section 5 of the FTC Act, the Electronic Fund Transfer Act, and the Telemarketing Sales Rule.

In its complaint, the FTC alleged that Avant required consumers to authorize recurring electronic fund transfers as part of their loan applications, stating that consumers could later change the method of payment. However, according to the FTC, Avant refused to accept debit or credit card payments from consumers who later attempted to switch payment methods. The FTC also charged, among other conduct, that the company withdrew money from consumers' accounts or charged their credit cards without authorization.

In addition to obtaining monetary relief for consumers, the FTC issued an order prohibiting Avant from taking unauthorized payments from consumers' accounts, collecting payments using remotely created checks, and misrepresenting material facts regarding, among other things, the accepted methods of payment, fees, and charges.

Lending Club

The FTC sued Lending Club in November 2018 alleging that it had misled borrowers by deceptively promising loans with no hidden fees. Lending Club's mail and online advertisements stated, "No hidden fees" and "No prepayment penalties." But the FTC alleged that the fine print, often behind obscure hyperlinks, stated otherwise and that the company charged, on average, a five percent fee and deducted the fee before disbursing its loans. The FTC asserted that this also resulted in consumers having to pay interest on the total requested loan amount even though the actual amount disbursed was less the fee charged by the company.

The lawsuit is pending in the Northern District of California.

Bitcoin Funding Team

In March 2018, the FTC brought an action in the Southern District of Florida to stop an allegedly fraudulent cryptocurrency scheme. In its complaint, the FTC charged four individuals operating under the name Bitcoin Funding Team with deceptively claiming that a small payment of bitcoin or litecoin, equivalent to about US$100, could be turned into US$80,000 in monthly income. On making the initial investments, participants were also eligible to recruit new members to make payments. The FTC alleged that in fact, the majority of participants would lose their initial investments.

The court granted the FTC's request for a temporary restraining order and asset freeze pending trial. Trial is set for 16 September 2019 in the Southern District of Florida.

Key takeaways

Companies must be mindful that traditional consumer protection principles continue to apply even if the products and services being offered are new and innovative. The following are some key lessons from the FTC's enforcement actions:

  • Representations to consumers must be truthful. Statements regarding products and services should be truthful and accurate.
  • Promises to consumers should be kept. Companies that make promises to consumers should follow through.
  • Avoid hidden fees. Key terms of an offering should not be hidden in fine print or in hardto-see hyperlinks. Consumers should be given clear and prominent information about all relevant terms.

The failure to abide by these key lessons could lead to a knock on the door by the FTC. If you have questions about any of these issues or receive an inquiry from the FTC, we are here to help.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions