Tim Bauer

Tim Bauer

The Consumer Financial Protection Bureau (CFPB) has ordered Springstone Financial, LLC (Springstone) to provide $700,000 in relief to victims of deceptive credit enrollment tactics. Springstone, headquartered in Westborough, Mass., is a wholly-owned subsidiary of San Francisco-based Lending Club Corporation.

The CFPB announcement states that many consumers who signed up for Springstone’s deferred-interest loan product at dental offices to pay for dental work were led to believe that the product was interest free. In fact, interest accrued from the date of the consumer’s purchase and was charged if the balance was not paid in full before the promotional period ended. Approximately 3,200 consumers who signed up for the product ultimately were charged and paid deferred interest.

The Bureau’s investigation found that providers who were trained and monitored by Springstone to market the deferred-interest loan product misled consumers about the terms and conditions of the product during the application process. In some cases, dental office staff told consumers that the deferred-interest product was a “no-interest” loan and failed to mention they would have to pay 22.98 percent interest on the loan if they didn’t pay it off in full by the end of the promotional period.

Under terms of the order Springstone must:

  1. Refund $700,000 to more than 3,200 consumers
  2. Conveniently repay those consumers


insideARM Perspective

This announcement is interesting to the ARM industry for at least two reasons.First, the subject of the action was a company that made loans in the HEALTHCARE space. There is still a smattering of individuals and companies in the ARM sector who believe healthcare is outside the purview of the CFPB. insideARM believes that is flawed thinking.

insideARM has previously reported  on the increased CFPB focus on healthcare debt. We also reported on the CFPB enforcement action against Syndicated Office Systems, LLC, a healthcare collection agency. This case continues that trend.

Second, this is appears to be a case where the CFPB investigation showed that representations made to consumers were inconsistent with written materials (the actual loan documents) AND that staff was either improperly trained or trained in such a way to intentionally mislead a consumer, a clear UDAAP violation.  The order highlights Springstone failure to properly train and monitor the individuals ‘selling” the product to the consumers.

Training and Monitoring are the backbone of any Compliance Management System.