WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today filed a proposed settlement against Driver Loan, LLC, and its CEO, Angelo Jose Sarjeant. If entered by the court, the settlement would require the defendants to refund about $1 million in deposits to harmed consumers, stop deceptive practices, and pay a civil penalty. The CFPB alleges that Driver Loan and Sarjeant violated federal law by misrepresenting the risks associated with their deposit product and the annual percentage rate (APR) associated with the consumer loans they make.
“Driver Loan deceived consumers on both sides of its business model. The company deceived depositors seeking a safe rate of return, while deceiving ride-share workers about the cost of its 900% APR loans,” said CFPB Acting Director David Uejio. “This case highlights that something is going wrong in the gig economy. The only reason this niche market for high-cost credit exists is because of billion-dollar companies shifting their costs onto their low-income workers.”
Driver Loan, based in Doral, Florida, offers short-term, high-interest loans to consumers funded by deposits made by other consumers. The proposed settlement seeks to resolve a pending lawsuit against Driver Loan and Sarjeant filed in federal district court in Florida in November 2020.
Deceiving Consumers about Deposit and Credit Products
The CFPB alleges that Driver Loan and Sarjeant engaged in deceptive acts or practices in violation of the Consumer Financial Protection Act of 2010 (CFPA). The allegations center around:
- Hiding risks about their loan deposit product: The CFPB alleges that, in 2020, Driver Loan began taking deposits from consumers to fund the loans it makes. Driver Loan represented to consumers that their deposits would have a fixed and guaranteed 15% annual percentage yield, and were deposited at FDIC-insured institutions. The CFPB alleges that Driver Loan’s representations were false: the funds were not held in FDIC-insured accounts, and the rate of return was not 15% APY. The CFPB also alleges that most deposited funds are lent to borrowers at rates that violate Florida’s criminal-usury law, rendering the loans uncollectable and creating substantial risk that obligations could not be met to depositors who sought to withdraw their deposited funds.
- Hiding the actual interest rate: The CFPB alleges that, since 2017, Driver Loan has offered short-term, high-interest personal loans, totaling more than $30 million, typically to drivers who work with ride-share companies. The loans have ranged from $100 to $500 each and are repayable in 15 daily installments. The CFPB also alleges that Driver Loan deceptively markets its loans as having an APR of 440% when the actual APRs are over 900%.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions that violate federal consumer financial laws, including those who engage in unfair, deceptive, or abusive acts or practices. The proposed settlement would require Driver Loan and Sarjeant to:
- Refund harmed consumers: The defendants would be required to return consumers’ deposits—roughly $1 million—plus all interest due to consumers under the terms of the advertised product.
- Stop deceptive practices: The defendants would be permanently banned from engaging in deposit-taking activity and from making deceptive statements to consumers.
- Pay a civil penalty: The order would also impose a penalty of $100,000 to be paid to the CFPB and deposited into the Bureau’s Civil Penalty Fund.
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.
Official news published at https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-company-and-its-ceo-for-deceptive-deposit-and-loan-products/
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