A federal watchdog agency has ordered an Atlanta-based financial technology company to pay a $2.5 million civil penalty and refund money to consumers after enabling contractors and other merchants to take out loans on behalf of thousands of consumers who didn’t authorize them.
The Consumer Financial Protection Bureau issued a consent order requiring the company, GreenSky, to refund or cancel up to $9 million in loans for customers “harmed by its illegal conduct.” It also ordered the company to implement measures to prevent fraudulent loans.
GreenSky said Monday that it agreed to the order without admitting any liability or wrongdoing. The company has “already implemented many of the protocols and business practices called for by the agreement,” GreenSky President Tim Kaliban said in a press release.
“The resolution of this matter also allows us to devote our full and undivided attention to growing and strengthening our business, which is built on a foundation of integrity and trust,” Kaliban later added.
CFPB Acting Director Dave Uejio said in a press release that “GreenSky’s careless business and customer service practices enabled its merchants to take advantage of vulnerable consumers.”
GreenSky, which was founded in 2006 and became a publicly traded company in 2018, offers a tech platform that allows businesses to quickly and easily offer promotional payment options to customers. GreenSky generates most of its sales and profits from fees paid by the merchants and service providers. Its customers include Home Depot, roofers, heating and air conditioning companies, healthcare providers and others.
Proceeds from the financing, often ranging from a few thousand dollars to tens of of thousands of dollars, go directly to the merchants.
The CFPB found that if merchants had some personal information about potential customers they could use GreenSky’s system to submit online loan applications without the customers’ knowledge. Some consumers didn’t find out until they received billing statements or collection letters or saw GreenSky’s name appear on their credit reports.
Between 2014 and 2019, GreenSky received at least 6,000 complaints from consumers who said they didn’t authorize submission of loan applications. In at least, 1,600 cases, GreenSky found that merchants were at fault, according to the government.
In some instances, GreenSky canceled loans and refunded consumers’ money or got the merchants to do so. But at least 2,800 consumers who complained didn’t receive refunds or have the loans written off, according to the CFPB.
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