WASHINGTON — Omni Financial of Nevada was fined more than $2 million by the Consumer Financial Protection Bureau over alleged violations of the Military Lending Act.
The CFPB alleges that the Las Vegas-based company, which specializes in loans to military service members, violated the MLA’s prohibition against requiring loan repayment by allotment.
Through allotment, borrowers designate a portion of their paycheck to be used to pay loans automatically. The CFPB’s consent order says that Omni has been violating the MLA’s ban on allotment since 2016.
"The system allows a servicemember to designate a portion of each paycheck to certain recipients other than the servicemember," bureau said in the consent order. "The allotment system was intended to help ensure that servicemembers could pay their obligations while they were deployed or otherwise unavailable to handle personal finances. Over the years, this has become less necessary as technology has made it easier to make payments automatically or remotely."
The agency said allotment enabled Omni to guarantee payment on unsecured loans.
"Affected Consumers have been harmed in the amount of interest and fees paid because they were wrongfully deprived of the option to pay by means other than allotment,” the order said.
The CFPB also alleged that Omni violated the Electronic Fund Transfer Act’s prohibition against requiring consumers to preauthorize electronic fund transfers as a condition of receiving credit. The CFPB alleges that Omni requires all of its borrowers to provide bank-account information and authorize the lender to withdraw funds.
In addition to the $2.175 million civil penalty that Omni must pay, the firm must provide notice of the CFPB’s findings to all customers repaying their loans by allotment along with notice that they may change their repayment method.
