CFPB’s Case Against MoneyLion and the Cost of Abusive Membership Lending
How the CFPB’s lawsuit against MoneyLion highlights protections for servicemembers and the risks of costly membership-based lending.
The Consumer Financial Protection Bureau (CFPB) filed a lawsuit against financial technology company MoneyLion, alleging that the company overcharged active-duty servicemembers and their families and trapped consumers in expensive membership programs tied to small loans. The case centers on alleged violations of the Military Lending Act (MLA) and the federal ban on unfair, deceptive, or abusive acts or practices (UDAAP) in consumer finance.
While the case focuses on a single lender, it illustrates broader risks in membership-based lending models and underscores legal protections designed specifically for servicemembers.
Background: Who Are the Key Players?
The Consumer Financial Protection Bureau (CFPB)
The CFPB is a U.S. government agency created after the 2008 financial crisis to regulate consumer financial products such as credit cards, loans, and bank accounts. Its mandate includes:
- Enforcing federal consumer financial laws.
- Taking action against companies that engage in unfair, deceptive, or abusive acts or practices.
- Monitoring markets to identify risks to consumers.
- Providing education and tools to help people make informed financial decisions.
MoneyLion’s Business Model in Brief
MoneyLion is a digital finance platform that markets itself as an all-in-one financial app, offering services like:
- Small-dollar installment loans.
- Membership programs with recurring fees.
- Budgeting, credit tracking, and other financial tools.
According to the CFPB’s complaint, some of MoneyLion’s loan products were closely tied to paid memberships, creating an ongoing cost structure for borrowers, including servicemembers.
Understanding the Military Lending Act
The Military Lending Act (MLA) is a federal law that provides extra protections for active-duty servicemembers and certain dependents when they use consumer credit, including some small-dollar and high-cost loans.
Core Protections Under the MLA
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| Protection | What It Means |
|---|---|
| Rate cap (36% MAPR) | The total cost of covered credit, expressed as the Military Annual Percentage Rate (MAPR), may not exceed 36%. Fees such as certain finance charges, credit insurance, and some add-on products must be included in this calculation. |
| No mandatory arbitration | Lenders cannot require covered borrowers to resolve disputes through mandatory arbitration clauses in covered credit contracts. |
| Required disclosures | Lenders must provide clear disclosures, including the MAPR and payment obligations, before the borrower becomes obligated on the loan. |
| Limits on certain lending practices | The MLA restricts practices like using a check or access to a bank account as security, or requiring repayment by military allotment for some products. |
These protections recognize that servicemembers can face unique risks from predatory lending, which can harm not only their finances but also readiness and career stability.
What the CFPB Alleges in the MoneyLion Lawsuit
In its complaint, the CFPB alleges that MoneyLion’s membership-based lending model violated both the MLA and broader consumer protection laws when dealing with covered servicemembers.
1. Effective Interest Above the 36% MLA Cap
The Bureau alleges that MoneyLion required borrowers, including servicemembers, to pay membership fees as a condition for accessing certain loans. When these recurring fees are combined with the stated loan interest and other charges, the CFPB contends that the total cost of credit exceeded the MLA’s 36% MAPR limit for covered borrowers.
This raises a central legal question: when a membership is functionally necessary to obtain or maintain a loan, should the membership fees be counted as part of the cost of credit under the MLA? The CFPB’s enforcement posture indicates that it believes they should be included when analyzing compliance with the 36% cap.
2. Use of Mandatory Arbitration Clauses
The CFPB also alleges that some of MoneyLion’s loan agreements with covered servicemembers contained mandatory arbitration clauses, which the MLA prohibits for covered credit contracts.
Because the MLA expressly forbids requiring covered borrowers to submit to arbitration instead of going to court, including such clauses in agreements with servicemembers can constitute a direct statutory violation.
3. Inadequate MLA Disclosures
According to the Bureau, MoneyLion failed to provide all the disclosures required under the MLA, including clear presentation of the MAPR and certain key loan terms for covered borrowers.
Failing to deliver these disclosures can prevent servicemembers from understanding the true cost of the loan and their repayment obligations, undermining the MLA’s transparency goals.
4. Trapping Consumers in Costly Memberships
Beyond alleged MLA violations, the CFPB claims that MoneyLion engaged in deceptive and abusive practices by making it unreasonably difficult for borrowers to cancel memberships tied to loans.
Allegations include:
- Marketing memberships as cancellable “at any time,” while preventing or restricting cancellation when a borrower had an outstanding loan balance or unpaid membership fees.
- Continuing to charge monthly fees even when consumers tried to cancel, especially where cancellation was blocked because of unpaid fees, creating a cycle of recurring charges.
- Using these restrictions to effectively force borrowers to keep paying membership fees long after the initial benefit or loan access was needed.
The CFPB contends that these actions violated the Consumer Financial Protection Act’s ban on unfair, deceptive, or abusive acts or practices (UDAAP), not only for servicemembers but for other consumers as well.
Why the Case Matters for Servicemembers
This lawsuit fits into a broader pattern of federal enforcement focused on protecting servicemembers from high-cost or deceptive credit products.
Enforcement Trend on Military Lending Act Violations
- The CFPB and other regulators have repeatedly taken action against lenders that exceed the MLA’s 36% rate cap, use mandatory arbitration, or fail to provide required disclosures.
- Cases have involved pawn loans, jewelry financing near military bases, and small-dollar installment loans marketed heavily to servicemembers.
- Enforcement outcomes often include restitution for harmed servicemembers, civil penalties, and orders requiring strict compliance programs.
By continuing litigation in MLA-related cases, regulators signal that protections for active-duty servicemembers remain a high priority, regardless of broader political shifts.
Consequences of MLA Violations for Lenders
Violating the MLA can carry serious consequences for creditors, including potential criminal liability in cases of knowing violations, civil damages, and the voiding of noncompliant contracts under some interpretations.
- Knowing MLA violations can be prosecuted as a misdemeanor, punishable by fines and up to one year in jail.
- Borrowers may be entitled to statutory damages, actual damages, and attorney’s fees in civil actions.
- Regulators can seek restitution and civil penalties and can impose compliance and monitoring obligations on violators.
Risks of Membership-Based Lending for Consumers
The MoneyLion case also illustrates how membership-based lending models can create hidden costs for all consumers, even beyond the servicemember context.
How Membership Fees Can Mask the True Cost of Credit
When membership fees are required or strongly tied to a loan, they can function as an additional finance charge, substantially increasing the effective cost of borrowing. Potential issues include:
- Recurring charges that continue long after the loan is repaid.
- Bundled services that borrowers may never use but must pay for to access or maintain a loan.
- Opaque pricing if the lender highlights a relatively low interest rate but downplays the cumulative impact of monthly membership fees.
Warning Signs of Potentially Abusive Membership Models
Consumers, including servicemembers, should approach membership-based credit products with caution where they encounter:
- Required memberships to obtain a loan or better loan terms.
- Difficulty finding clear instructions on how to cancel a membership.
- Fine print stating that cancellation is not allowed while any balance remains, or that unpaid fees can block cancellation.
- Marketing that emphasizes “cancel anytime,” but customer reviews or complaints that describe barriers to ending the relationship.
Practical Guidance for Servicemembers and Families
Servicemembers have additional resources and protections when dealing with lenders. Understanding and using these tools can prevent long-term financial harm.
Steps to Take Before Accepting a Loan
- Check MLA status: Confirm whether the loan is covered by the MLA and ensure the rate, terms, and disclosures comply with its protections.
- Ask for the MAPR: For covered loans, ask for the total cost of credit under the Military Annual Percentage Rate, not just the standard APR.
- Review arbitration language: As an active-duty servicemember or covered dependent, you should not be required to agree to mandatory arbitration in a covered credit contract.
- Understand membership obligations: Clarify whether the loan requires joining a membership, how much it costs each month, and how and when you can cancel.
What to Do If You Suspect an MLA Violation
If you believe a lender has violated the Military Lending Act or engaged in deceptive practices, you can:
- Submit a complaint to the CFPB: The Bureau accepts consumer complaints about financial products and may investigate patterns of misconduct affecting servicemembers.
- Contact base legal assistance: Judge Advocate General (JAG) offices or legal assistance attorneys can help evaluate whether a loan complies with the MLA and advise on next steps.
- Gather documentation: Keep copies of contracts, disclosures, marketing materials, and correspondence showing how the product was represented to you.
Frequently Asked Questions (FAQs)
Q1: Who is protected by the Military Lending Act?
The MLA protects most active-duty servicemembers, including those on active Guard or Reserve duty, and certain dependents, such as spouses and qualifying children, when they obtain covered consumer credit.
Q2: Does the MLA ban all high-cost loans to servicemembers?
The MLA does not ban all high-cost credit, but it caps the Military Annual Percentage Rate at 36% for covered loans and prohibits certain contract terms, including mandatory arbitration, for those loans.
Q3: Are membership fees always included in the MLA rate cap?
Whether membership fees count toward the MAPR depends on how the product is structured. When membership fees are required or functionally necessary to obtain or maintain a loan, regulators may treat them as part of the cost of credit under the MLA’s rules.
Q4: Can a servicemember be forced into arbitration on a covered loan?
No. For covered loans, the MLA expressly prohibits mandatory arbitration clauses that prevent covered borrowers from taking disputes to court.
Q5: How can I file a complaint if I think a lender is breaking the law?
You can file a complaint with the CFPB, which uses complaints to identify patterns of illegal conduct and may pursue enforcement actions. You can also seek help from military legal assistance offices or consumer law attorneys.
References
- CFPB Continues Lawsuit Over Alleged Military Lending Act Violations — Consumer Finance & FinTech Blog (Goodwin). 2025-03-01. https://www.consumerfinanceandfintechblog.com/2025/03/cfpb-continues-lawsuit-over-alleged-military-lending-act-violations/
- FTC and CFPB Crack Down on Military Lending Act Violations — Consumer Financial Services Law Monitor (Troutman Pepper). 2022-07-13. https://www.consumerfinancialserviceslawmonitor.com/2022/07/ftc-and-cfpb-crack-down-on-military-lending-act-violations-2/
- CFPB Reaches Settlement with FirstCash, Inc. and Its Subsidiaries for Military Lending Act Violations — Consumer Financial Protection Bureau. 2025-07-22. https://www.consumerfinance.gov/about-us/newsroom/cfpb-reaches-settlement-with-firstcash-inc-and-its-subsidiaries-for-military-lending-act-violations/
- Is Your Lender Violating the Military Lending Act? — U.S. Marine Corps (MCI-East Legal Assistance). 2019-04-18. https://www.mcieast.marines.mil/Portals/33/Documents/LSSS-East/Legal%20Assistance/Consumer%20Law/Is%20your%20lender%20violating%20the%20Military%20Lending%20Act%2018%20April%202019.pdf
- Military Lending Act — U.S. Department of Defense, Office of Financial Readiness (FINRED). 2022-04-01. https://finred.usalearning.gov/assets/downloads/FINRED-MLA-FS.pdf
- V. Lending — Military Lending Act — Federal Deposit Insurance Corporation (FDIC) Consumer Compliance Examination Manual. 2022-06-01. https://www.fdic.gov/regulations/compliance/manual/5/V-13.1.pdf
- How the Military Lending Act Protects Service Members — Army Emergency Relief. 2021-08-30. https://www.armyemergencyrelief.org/news/how-the-military-lending-act-protects-service-members/
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