The Consumer Financial Protection Bureau (CFPB) has sued the Utah-based lease-to-own finance company Snap Finance for allegedly deceiving consumers and making false threats, according to a release by CFPB.
The lawsuit alleges that Snap Finance violated several consumer protection laws, such as the Consumer Financial Protection Act, the Truth in Lending Act, the Electronic Fund Transfer Act, and the Fair Credit Reporting Act, by engaging in misleading advertising, obscuring the terms of financing agreements, and employing illegal debt collection practices.
“Snap Finance illegally obscured terms and conditions of their so-called ‘rental purchase agreements,’ which led to exorbitant charges,” said CFPB Director Rohit Chopra. “To ensure fair competition and to protect the public, the CFPB is carefully watching lending outfits operating outside of the traditional banking system.”
In a lawsuit filed in federal district court, CFPB has accused Snap Finance of offering and providing millions of “lease-purchase” and “rental-purchase” financing agreements in ways that have harmed consumers, including through deceptive advertising, inadequate disclosures, and impeding consumers’ understanding of the terms and conditions of its financing agreements.
The suit also alleges Snap Finance maintained its illegal behavior while servicing those agreements, misrepresenting clients’ payment requirements and making up threats to collect debt, the release stated.
Snap Finance works with hundreds of businesses around the country to create, advertise, and insure “rental-purchase” or “lease-purchase” deals for customers on goods and services such as mattresses, vehicle parts and repairs, jewelry, furniture and appliances, auto electronics, and auto repairs, are given financing agreements. More than three million “rental-purchase” or “lease-purchase” agreements have been sold by Snap Finance since at least January 2017, the release said.
According to the suit Snap Finance specifically hurt customers at every stage of the buying process, from advertising to enrollment to servicing to collections, aggressively promoting its financing through commercials that mislead consumers about the nature of the arrangement and omitting the exact costs customers would incur.
This was done in an effort to force consumers into pricey contracts, the suit alleged. Thinking had signed a 100-day financing arrangement, consumers were really automatically enrolled in a 12-month payment plan, which often calls for total payments that exceed the cost of the financed good or service in cash.
