On May 22, 2024, the Massachusetts Attorney General (MA AG) announced it entered into an Assurance of Discontinuance (AOD) with a California-based financing company resolving allegations of violations of the Massachusetts Consumer Protection Act.
The MA AG alleged that the company engaged in a "rent-a-bank" scheme, whereby the company partnered with an out-of-state bank in an attempt to circumvent Massachusetts's maximum interest rates of 20%. Although the out-of-state bank retained title of these loans, the MA AG alleged the company is actually the "true lender" of these loans as the company had a 90% participation interest in the loans, took on the risk of non-performance on the loans, provided the marketing and customer service for the loans, and provided the underwriting model for the loans. The MA AG further alleged that, since 2018, the average annual percentage rate of these loans was over 100%.
The AOD provides that the company will cease making, facilitating, or servicing loans in Massachusetts and will cease collection on all active and defaulted loans in Massachusetts. The company also agreed to pay $625,000 in restitution to Massachusetts consumers.
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