On July 19, 2023, the CFPB sued lease-to-own finance company Snap Finance for deceiving consumers, obscuring the terms of its financing agreements, and making false threats. According to the CFPB, Snap Finance’s practices violate the Consumer Financial Protection Act, the Truth in Lending Act, the Electronic Fund Transfer Act, and the Fair Credit Reporting Act. The CFPB is seeking monetary relief for consumers, an end to Snap Finance’s illegal practices, and a civil money penalty.
CFPB Director Rohit Chopra said the following in a statement:
“Snap Finance illegally obscured terms and conditions of their so-called 'rental purchase agreements,' which led to exorbitant charges. To ensure fair competition and to protect the public, the CFPB is carefully watching lending outfits operating outside of the traditional banking system.”
Snap Finance is a consumer finance company that partners with thousands of merchants nationwide to offer, market, and underwrite “rental-purchase” or “lease-purchase” agreements to consumers. Since at least January 2017, Snap Finance has sold more than three million “rental-purchase” or “lease-purchase” arrangements.
The CFPB alleges that Snap Finance harmed consumers throughout the consumer experience, from advertising to enrollment to servicing to collections by:
Using deceptive advertising practices to lock consumers into expensive agreements. Snap Finance aggressively marketed its financing with advertisements that misled consumers such as their “100 Day Cash Payoff,” which led consumers to believe they had entered into a 100-day financing agreement. The truth is consumers were automatically entered into 12 months of payments that amounted to more than double the cash price of the financed merchandise or service.
Obscuring the terms and conditions of its financing agreement to confuse consumers about their payment obligations. Using a tablet-based system designed and provided by Snap Finance, merchants commonly signed and submitted agreements on behalf of consumers without their review. Snap Finance also failed to provide consumers with required disclosures about the cost of credit, such as finance charges and annual percentage rates.
Misrepresenting consumers’ rights in the finance agreements. Snap Finance made false and misleading statements to consumers about their rights under the agreement, which led consumers to believe they could not terminate their agreement or surrender merchandise back to the lender.
Making false threats and deceptive statements to struggling borrowers. The company also employed illegal debt collection practices by threatening actions and misrepresenting consumers’ payment obligations under their agreement.
The CFPB’s full press release can be found here.
The complaint can be found here.
