Lenders, You Are Your Vendors’ Keeper
With consumers given the green light to sue lenders over the third-party vendors that they expose to borrowers, lenders have a mandate to ensure the consumer is protected. Utilizing reasonable checks and balances to protect consumers from illegal activity, both within and outside their organizations, is one significant way lenders can be certain they are doing everything they can. The Consumer Financial Protection Bureau has initiated a complaint against one lead generator and banned the principal of another for failing to properly protect consumers in regard to who the lead generators sold leads. Lenders should regard the concept of “vendor” broadly, and to include purchasers of data. Additionally, the failure to review business affiliations, and to utilize a reasonable plan for evaluating business partners, can leave a company susceptible to enforcement if it turns out that unverified business relationships have engaged in improper or illegal practices. In the case of T3Leads, the CFPB alleges that T3 lured consumers to generate leads by indicating that T3 sold leads to lenders offering reasonable rates and/or lenders who did business the “right way.” In fact, according to the CFPB, T3 failed to vet its lead buyers, selling leads to companies located outside the U.S. — or otherwise claiming immunity from state usury laws — who offered unfair terms to consumers. According to the CFPB, these same lenders paid the highest prices for T3 leads. In another case involving a defunct lead aggregator, Lead Publisher, its former owner was permanently banned from the financial industry because he sold loans to companies that engaged in unlawful debt collection practices against consumers. The CFPB alleged that Lead Publisher failed to make any examination of the companies it purchased leads from or sold leads to, despite the fact that Lead Publisher should have realized based on the volume and type of business that improper activity was potentially being used for illegal purposes. The CFPB expects, at minimum, that lenders and other industry actors take reasonable measures to protect consumers. Performing due diligence to vet potential business affiliates and review their plans, is a responsibility lenders must take seriously.