The Consumer Financial Protection Bureau (“CFPB”) recently took aim at Driver Loan LLC (the “Company”), a company which frequently offers loans to drivers of ride share services, for the Company’s alleged deceptive practices. In its complaint, the CFPB described that, in addition to giving loans to drivers of Uber and Lyft, the Company also took deposits from consumers to fund these driver loans. The CFPB alleged that the Company and its CEO created a deceptive business model because: (i) the Company told consumers they could deposit funds with it in FDIC insured accounts, although the accounts were not FDIC insured; (ii) consumers who deposited funds with the Company were promised a 15% rate of return which they did not receive; and (iii) the short term loans offered to drivers of ride share companies had an APR of, at times, over 900% when they were advertised as having APRs of 440%.
The CFPB recently reached a settlement with the Company where the Company would be required to pay approximately one million dollars for the interest owed to consumers who utilized the Company’s financial products and services, pay a one hundred thousand dollar civil penalty and cease its deceptive practices. Although not described as “payday loans”, the short-term nature of the driver loans and the CFPB’s described use by the driver’s of these loans (i.e., for driver’s regular and household expenses) mimic payday loans. The CFPB has previously given a significant amount of attention to payday lending and is expected to continue to do so under the new leadership appointed by the Biden administration. For example, in 2017, the CFPB created a new payday lending rule that both banned a lender’s ability to continually debit payments from a borrower’s account after two consecutive failed attempts and imposed mandatory underwriting provisions. Under these mandatory underwriting provisions, lenders were required to make a “reasonable determination” about a borrower’s ability to repay their payday loan.
However, it should be noted that, three years later, while under new leadership, the CFPB stripped the mandatory underwriting requirement from the payday lending rule while keeping the ban on debiting a borrower’s account after two consecutive failed attempts. Additionally, in the fall of 2020, the CFPB reported that it will conduct testing about payday loan disclosures to determine how consumers use the information disclosed to them when considering the cost, payment, and timing regarding a payday loan.
The CFBP’s action against Driver Loan LLC represents a continued focus on short-term loans, and, relatedly, transparency in disclosing high-interest rates and ensuring a consumer makes an informed choice about incurring what can often be costly debt. Evidencing this focus, on May 11, 2021, the CFPB’s Acting Director David Uejio stated that “[t]he CFPB is acutely aware of consumer harms in the small dollar lending market, and is particularly concerned with any lender’s business model that is dependent on consumers’ inability to repay their loans. The Bureau will use the authority provided by Congress to address these harms, including through vigorous market monitoring, supervision, enforcement, and through appropriate rulemaking.” As a result, we expect to see an increase in CFPB oversight related to payday loans and other types of short-term loans.
 Complaint at Bureau of Consumer Financial Protection v. Driver Loan LLC, et al., No. 1:20-cv-24550-DLG, 2020 CFPB Admin. Proc. LEXIS 108 (S.D.Fla. Nov. 5, 2020).
 Stipulated Judgment and Order at Bureau of Consumer Financial Protection v. Driver Loan LLC, et al., No. 1:20-cv-24550-DLG, 2021 CFPB Admin. Proc. LEXIS 39 (S.D.Fla. June 1, 2021).
 Executive Summary of the Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule, CFPB Press Release (Oct. 5, 2017), https://files.consumerfinance.gov/f/documents/201710_cfpb_executive-summary_payday-loans-rule.pdf.
 Consumer Financial Protection Bureau Issues Final Rule on Small Dollar Lending, CFPB Press Release (July 7, 2020), https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-final-rule-small-dollar-lending/.
 85 Fed. Reg. 71,886 (November 12, 2020).
 Prepared Remarks of Acting Director Dave Uejio at the National Association of Attorneys General Spring Consumer Protection Conference, CFPB Newsroom (May 11, 2021), https://www.consumerfinance.gov/about-us/newsroom/prepared-remarks-of-acting-director-dave-uejio-at-the-national-association-of-attorneys-general-spring-consumer-protection-conference/.