The online lender Avant will pay $3.85 million to settle Federal Trade Commission allegations that it misled customers who were seeking to repay their loans.
The FTC said Monday that its commissioners approved the settlement by a 5-0 vote. The agency also detailed its allegations, which involved the firm’s loan servicing practices and had not previously been made public.
The Chicago-based lender allegedly informed consumers that they could make payments by credit card or debit card but then refused to accept such payments. It allegedly deceived borrowers about how much money was necessary to pay off their loans. And it allegedly failed to credit payments made by check in a timely manner.
Avant was also accused of charging payments that consumers did not authorize. One customer’s account was charged 11 times in a single day, according to the FTC.
“Avant’s conduct has resulted in late fees and additional interest and caused consumers’ credit to be damaged by false reports of defaults and deficiencies that many consumers have been unable to correct even after months of trying,” the FTC alleged in its complaint.
The agency said that the multi-million dollar judgment will be returned to consumers who were harmed by Avant’s practices.
Avant CEO Al Goldstein said in a written statement that the company has been in discussions with the FTC for months, and that the two parties recently reached a mutually agreeable resolution.
“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,” Goldstein said.
Avant offers personal loans of two to five years in amounts ranging from $2,000 to $35,000. The loans can be used to consolidate debt or to finance home improvement projects, among other purposes. Customers pay annual percentage rates of 9.95% to 35.99%, according to the company’s website.
Avant, which was founded in 2012, has also partnered with HSBC and Regions Financial to offer personal loans to customers of those banks.
Last week, Politico reported that Avant was in late-stage discussions with the Office of the Comptroller of the Currency about the agency’s limited purpose bank charter for financial technology firms.
The case against Avant is one of at least three brought by the FTC against online lenders in the last year. Last April, the agency accused LendingClub of making misleading claims in advertisements. The San Francisco-based company has said that the allegations are unwarranted, and the case is ongoing.
In October, Social Finance Inc. reached a settlement with the FTC regarding allegations that it misrepresented how much money consumers would save by refinancing their student loans through the company.
In a blog post published Monday, an FTC official suggested that the Avant settlement has implications for other online lending companies.
“Online lending may be relatively new, but unauthorized payments and untruthful claims have been around way too long,” Lesley Fair, an attorney at the FTC, wrote.
“It benefits consumers — and in the long run, it benefits business — if 21st century financial platforms abandon misleading 20th century practices.”