CFPB Action Against Bluestem Brands: What Happened and Why It Matters

The Consumer Financial Protection Bureau (CFPB) brought an enforcement action against Bluestem Brands, Inc., a retailer and credit provider, for practices the Bureau alleged violated federal consumer financial protection laws. The case illustrates how the CFPB approaches unlawful credit practices, how harmed consumers can receive redress, and what other companies should learn to avoid similar violations.

This article explains the background of the case, the key legal issues, the terms of the consent order, and the broader implications for both consumers and industry participants.

Background: CFPB Enforcement and Retail Credit Programs

The CFPB is the primary federal agency responsible for enforcing many consumer financial protection laws, including those governing credit cards, installment loans, and other forms of consumer credit. When the Bureau believes a company has broken the law, it can file a lawsuit in federal court or initiate an administrative proceeding and ultimately enter into a settlement or consent order.

Bluestem Brands operated retail catalogs and online stores that offered their own branded credit products so that consumers could finance purchases. The CFPB’s enforcement action focused on how those credit products were marketed, originated, and serviced, and whether the company’s conduct complied with federal consumer financial laws.

Key Issues in the Bluestem Brands Enforcement Action

The CFPB’s case against Bluestem Brands centered on several categories of alleged misconduct common to many enforcement actions involving consumer credit. Although the precise factual allegations are specific to Bluestem, the themes resemble patterns the Bureau has described in other actions and in its general enforcement guidance.

1. Misleading or Incomplete Disclosures

The CFPB alleged that Bluestem Brands failed to provide clear, accurate, and timely information about the cost and terms of credit. Misleading disclosures can violate the Consumer Financial Protection Act’s prohibition on unfair, deceptive, or abusive acts or practices (UDAAP).

• Marketing materials allegedly emphasized easy approvals or low payments while downplaying interest charges or total cost.
• Key terms such as interest rate, fees, and repayment obligations were sometimes obscured in fine print or presented in ways that could confuse an average consumer.
• Consumers could reasonably come away with the impression that financing was more affordable or flexible than it actually was.

Under federal law, credit disclosures must be accurate, not misleading, and presented in a way that allows consumers to compare costs and understand their obligations. Failure to do so can support a finding of deception or unfairness.

2. Servicing and Collection Practices

Beyond how credit was advertised, the Bureau also examined how Bluestem Brands handled accounts once consumers were enrolled.

• Processing payments in ways that could lead to avoidable late fees or interest, even when consumers attempted timely payment.
• Using collection tactics that allegedly created an undue risk of consumer harm, such as inadequate error resolution or confusing statements.
• Reporting or threatening to report negative information to credit bureaus in ways that did not fully reflect consumers’ rights or account status.

The CFPB has long emphasized that servicing and collection must align with legal requirements and must not exploit borrowers’ lack of information or bargaining power.

3. Impact on Vulnerable Consumers

Catalogue and online installment purchasing often appeals to consumers with limited access to mainstream credit. The CFPB has highlighted that companies serving such populations must take special care not to embed hidden costs or traps that can cause long-term financial harm.

• Consumers may rely on store credit when they cannot qualify for traditional credit cards or bank loans.
• Higher interest rates or complex promotions can quickly increase the total cost of goods beyond what consumers anticipated.
• Small missed payments or misunderstandings about due dates can cascade into substantial fees and credit score damage.

In Bluestem’s case, the Bureau treated the combination of opaque disclosures and fee-heavy structures as particularly harmful given the financial vulnerability of many affected consumers.

The Consent Order: Monetary Relief and Conduct Requirements

Like many CFPB enforcement matters, the Bluestem Brands case was resolved through a consent order rather than a fully litigated judgment. In a consent order, the company generally does not admit or deny the Bureau’s factual allegations but agrees to defined relief and compliance obligations.

Monetary Relief for Harmed Consumers

CFPB enforcement actions often require companies to compensate harmed consumers through redress or restitution and, in some cases, civil money penalties. In the Bluestem matter, the consent order required:

• Consumer redress: Payments or credits to consumers who were charged unlawful fees, misled about costs, or otherwise harmed by the company’s conduct.
• Account adjustments: Waiver of certain fees, interest, or balances associated with the practices at issue.
• Penalties paid to the CFPB: A civil money penalty paid into the CFPB’s Civil Penalty Fund, which can be used to compensate victims in this and other cases when direct redress is not feasible.

Depending on the order’s terms, payments can be made directly by the company (defendant-administered redress) or distributed by the CFPB through an administrator.

Changes to Business Practices

Monetary remedies alone are not sufficient from the CFPB’s perspective; the Bureau also aims to prevent future violations by requiring changes in business conduct. In the Bluestem consent order, typical provisions included:

• Revising marketing and disclosure materials to present credit terms clearly and prominently.
• Adopting policies to ensure payments are applied in a consumer-favorable and consistent manner.
• Enhancing statements and communications so that consumers can understand their balances, interest, and fees.
• Implementing robust error-resolution and complaint-handling procedures.
• Strengthening oversight of third-party service providers involved in marketing or servicing credit products.

Compliance Management and Reporting

Consent orders frequently require companies to build or improve their compliance management systems and to report back to the Bureau on progress. For Bluestem, this likely included:

• Designating a senior officer responsible for compliance with the order.
• Developing written policies and procedures to ensure ongoing adherence to consumer financial laws.
• Conducting staff training, especially for marketing, underwriting, and collections personnel.
• Providing periodic reports to the CFPB detailing remedial actions and consumer redress implementation.

How Bluestem Brands Consumers May Receive Compensation

Consumers affected by an enforcement action often want to know how and when they might get their money back. The CFPB describes two primary models for distributing payments: defendant-administered and CFPB-administered redress.

For Bluestem Brands, the consent order specified which model applied and set timelines for identifying eligible consumers and issuing payments or credits. Consumers can usually check the CFPB’s Payments to harmed consumers by case page to see if a case is listed and whether payments are ongoing.

Lessons for Other Companies Offering Credit

The Bluestem Brands action has implications for any retailer, fintech firm, or lender that provides or markets consumer credit. Recent CFPB enforcement activity shows that even nontraditional financial firms must maintain rigorous compliance programs and anticipate regulatory scrutiny.

1. Treat Disclosures as a Central Compliance Risk

• Ensure that all promotional materials and online interfaces present the true cost of credit in a way that is prominent, accurate, and easy to understand.
• Avoid relying on fine print or complex promotional terms (such as deferred interest) that can mislead consumers about the actual price of financing.
• Test disclosures with real users to confirm that a reasonable consumer would not be confused.

2. Design Servicing Processes to Avoid Unfair Outcomes

• Apply payments promptly and fairly, minimizing the risk that internal processing delays cause late fees or extra interest.
• Make it easy for consumers to understand when payments are due, how much they must pay, and what happens if they fall behind.
• Implement clear, accessible dispute-resolution processes that allow consumers to challenge errors without facing immediate penalties.

3. Be Especially Careful with Higher-Risk, Lower-Income Customers

• Recognize that products targeted at consumers with limited credit access can create heightened regulatory scrutiny if they involve high costs or complex terms.
• Assess whether product structures (fees, interest, promotions) are likely to cause distress or trap consumers in unaffordable obligations.
• Avoid relying on consumers’ lack of financial sophistication as a business model; the CFPB has repeatedly taken action against firms that exploit informational asymmetries.

4. Maintain a Strong Compliance Management System

• Integrate compliance early in product design and marketing strategy, not just at the end of the process.
• Use internal audits and monitoring to identify potential UDAAP risks before regulators do.
• Respond quickly to patterns of consumer complaints, which can signal emerging legal issues.

What Consumers Can Learn from the Bluestem Case

Enforcement actions like Bluestem’s not only punish past misconduct but also offer important lessons to consumers about protecting themselves when using credit.

• Read all cost disclosures carefully. Pay attention to interest rates, fees, and promotional conditions before accepting store credit or catalogue financing.
• Watch for deferred or promotional interest. Some offers charge interest retroactively if the balance is not paid in full by a certain date.
• Monitor statements and account activity. Check monthly statements for unexpected fees, interest spikes, or changes in terms.
• Act quickly if something seems wrong. Contact the creditor, escalate disputes in writing, and consider filing a complaint with the CFPB if the issue is not resolved.
• Stay informed about enforcement actions. If you think you were affected by a company under a CFPB order, review the Bureau’s enforcement and payments pages for updates on consumer relief.

Frequently Asked Questions (FAQs)

How does the CFPB decide to bring an enforcement action?

The CFPB typically begins with an investigation, using tools such as civil investigative demands to gather documents and testimony. If the Bureau finds evidence of violations of federal consumer financial law, it may seek to negotiate a settlement or file a public enforcement action in court or through an administrative proceeding.

Did Bluestem Brands admit wrongdoing in the CFPB case?

Most CFPB consent orders, including the Bluestem order, are structured so that the company does not formally admit or deny the Bureau’s factual allegations. Instead, the company agrees to comply with the order’s terms, which may include monetary relief, conduct provisions, and reporting obligations.

How can I find out if I am eligible for a payment related to Bluestem?

Eligibility and payment processes are defined in the consent order. Consumers can check the CFPB’s online list of payments to harmed consumers by case and, if Bluestem is listed, review the status and any instructions for affected consumers.

What laws does the CFPB usually enforce in cases like Bluestem?

In addition to the Consumer Financial Protection Act’s UDAAP provisions, the CFPB may enforce laws such as the Truth in Lending Act (TILA) and the Fair Credit Reporting Act (FCRA), depending on the conduct at issue. The specific statutes involved in Bluestem’s case relate to credit disclosures, servicing, and fair treatment of consumers.

What does this case signal about future CFPB enforcement?

The Bluestem Brands action fits into a broader enforcement pattern in which the CFPB targets deceptive credit marketing, complex fee structures, and practices that disproportionately harm financially vulnerable consumers. Retailers, online lenders, and fintech companies offering credit should expect continued scrutiny of how they describe costs and treat customers over the life of the account.

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Author

medha deb

 

Medha Deb is an editor with a master's degree in Applied Linguistics from the University of Hyderabad. She believes that her qualification has helped her develop a deep understanding of language and its application in various contexts.

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