CFPB fines house enchancment fintech GreenSky $2.5M, orders $9M in refunds


Diving letter:

  • The Consumer Financial Protection Bureau (CFPB) fined mortgage broker GreenSky $ 2.5 million on Monday, asking the fintech to refund or cancel loans of up to $ 9 million that the Company has granted trading partners on behalf of customers who have indicated not requesting or authorizing them to do so.
  • According to CFPB, between 2014 and 2019, GreenSky received more than 6,000 complaints from customers who reported failing to submit a loan application. The merchant was to blame in around 1,600 cases, the investigators in the office found. The lender worked with some borrowers to resolve issues, but in at least 2,800 cases the complainant received neither a refund nor a write-off, the CFPB wrote in its consent form.
  • Under the agreement, GreenSky must verify consumers’ identities and obtain proof of a borrower’s authorization before activating loans or withdrawing funds, the CFPB wrote. The company must also provide complaint management staff and have clear dispute resolution schedules. It took more than six months, in around 100 cases, for the fintech to resolve complaints, the bureau found. The consent order would require GreenSky to provide account credit to borrowers within five days of receiving a complaint.

Dive Insight:

GreenSky lets its partner dealers use its software to collect financial information and automatically submit credit applications on behalf of customers. Written confirmation from the borrower is required prior to filing the application, but the CFPB noted that in some cases GreenSky did not review these documents until a complaint was filed under the consent order. The office directed the fintech to exercise effective oversight over third party trading partners.

“GreenSky’s negligent business and customer service practices have enabled its dealers to take advantage of vulnerable consumers in need of financial assistance,” CFPB’s acting director Dave Uejio said in a press release on Monday. “It is just wrong for consumers to go into debt to GreenSky for loans they did not know about. The CFPB will not stand for practices that allow such behavior in the marketplace.”

As part of the agreement, GreenSky did not admit any liability or misconduct. The company “has already implemented many of the protocols and business practices” that the CFPB was calling for, Tim Kaliban, President and Chief Risk Officer of GreenSky, said in a statement. “Resolving this matter also enables us to devote our full and undivided attention to the growth and strengthening of our business, which is built on a foundation of integrity and trust. We have fully cooperated and respected and cooperated with the CFPB in connection with their investigation appreciate the important role it plays in terms of consumer protection. “

GreenSky reportedly allowed merchants to submit loan applications for up to two months prior to October 2019 before participating in a mandatory training program, the CFPB noted. The order forces the company to change its training regulations.

The fintech’s Merchant Risk Unit has also been more negligent in reviewing loan applications from its larger partners, the bureau found. The staff of the unit were instructed to “change their recommendations on suspensions and terminations of traders based on a trader’s volume of business,” the CFPB noted.

Shortly before October 2019, GreenSky had nine banking partners. One bank, Regions, said earlier this year it would not renew its funding relationship when it expires. The bank originally wanted to establish point-of-sale credit partnerships to see if it could boost customer base growth. However, Regions CEO John Turner said the bank had chosen to focus more on direct relationships.

Towards the end of the partnership, GreenSky Chief Administrative Officer, Gerry Benjamin, told American Banker, “We can only conclude that the regions believe they can redeploy these assets and achieve higher returns on a risk-adjusted basis.”

The regions increased their presence in the home improvement lending business last month and bought EnerBank as part of a $ 960 million deal.