CFPB’s Case Against Moneytree: Deception, Penalties, and Lessons
How the CFPB’s enforcement action against Moneytree reshaped expectations for truthful payday lending and debt collection practices.
The enforcement action brought by the Consumer Financial Protection Bureau (CFPB) against Moneytree, Inc. offers a clear example of how federal regulators respond when financial firms mislead borrowers and mishandle consumers’ bank accounts. The case centers on deceptive online advertising, misleading collection letters, and unauthorized electronic fund transfers tied to payday lending and check-cashing services.
This article explains what happened, which laws were implicated, what penalties were imposed, and what practical lessons consumers and lenders can draw from the case.
Who Is Moneytree and Why the Case Matters
Moneytree, Inc. is a financial services company based in Seattle that provides payday loans, check-cashing, and related products in several U.S. states. Payday loans are typically short-term, small-dollar loans that carry high costs and are often used by people with limited access to traditional credit.
The CFPB had examined Moneytree’s operations multiple times and identified persistent weaknesses in its compliance management system before the conduct at issue in this case occurred. Regulators ultimately concluded that the company’s failures were serious enough to require a public enforcement order and monetary penalties.
- Industry: Payday lending and check-cashing
- Regulator: Consumer Financial Protection Bureau (CFPB)
- Key concerns: Deceptive advertising, misleading collection threats, and unauthorized withdrawals from consumers’ bank accounts
Overview of the CFPB’s Findings
According to the CFPB’s consent order and press release, Moneytree’s conduct violated federal consumer financial laws in three primary ways:
- Misleading online advertisements for check-cashing fees
- False threats that vehicles could be repossessed for unsecured installment loans
- Unauthorized debits from bank accounts without valid written authorization
The agency found that these practices amounted to unfair or deceptive acts or practices under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and in the case of the electronic fund transfers, also violated the Electronic Fund Transfer Act and its implementing Regulation E.
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Deceptive Online Advertising: What Went Wrong
One of the most visible issues involved online advertisements promoting Moneytree’s check-cashing service around tax season. The company ran digital ads stating that tax refund checks could be cashed for “1.99,” which consumers could reasonably read as a flat fee of $1.99.
In reality, the fee was 1.99 percent of the amount of the refund check, not a fixed dollar amount. The ads appeared online tens of thousands of times and required consumers to visit a branch to complete the transaction. The CFPB concluded that the way the fee was presented was deceptive because it created a materially false impression of the cost.
Why this advertising was considered deceptive
- The fee presentation omitted the percent sign, implying a low flat fee instead of a percentage of the check amount.
- Consumers deciding whether to use the service could not accurately assess the cost from the ad alone.
- Price is a central factor in financial decisions, so misrepresenting cost is considered materially misleading.
Under the Dodd-Frank Act, the CFPB can take action against entities that engage in unfair, deceptive, or abusive acts or practices (UDAAP) in connection with consumer financial products. Advertising that misstates or obscures price information can fall squarely within this authority.
Misleading Collection Letters and False Repossession Threats
The CFPB also focused on collection letters Moneytree sent to borrowers with past-due installment loans. These letters warned some consumers that their vehicles could be repossessed if they did not bring their accounts current.
The problem: none of the affected loans were secured by vehicles. Moneytree had no legal right or practical ability to repossess the consumers’ cars or trucks.
Elements of the misleading collection conduct
- Letters suggested that collateral could be seized when no such collateral existed.
- The consumers who received the letters held unsecured installment loans.
- The warnings created unjustified pressure and fear of losing essential property.
Even though Moneytree later sent follow-up notices telling recipients that the earlier letters were erroneous and should be disregarded, the CFPB concluded that the initial threats were still deceptive and violated federal law. Regulators emphasized that corrective notices did not erase the original harm or the legal violation.
Unauthorized Electronic Fund Transfers
The third major issue involved withdrawals from consumers’ bank accounts via the Automated Clearing House (ACH) network. For hundreds of Washington State consumers, Moneytree entered into payment arrangements that did not contain clear written authorization for electronic fund transfers.
Despite the lack of proper authorization, the company processed ACH debits from dozens of those consumers’ bank accounts. While Moneytree later refunded the debits, the CFPB determined that the conduct violated the Electronic Fund Transfer Act and Regulation E, which require that preauthorized electronic fund transfers be authorized in writing or similarly authenticated.
Key legal requirements for preauthorized transfers
- Consumers must provide written or similarly authenticated authorization for recurring electronic debits.
- The terms of the authorization must be clear and readily understandable.
- Financial institutions and lenders must keep evidence of the authorization.
By initiating transfers without valid written consent, Moneytree exposed affected consumers to unexpected account debits and possible bank fees, prompting the CFPB to require monetary redress.
Penalties and Remedies Ordered by the CFPB
Under its enforcement authority, the CFPB ordered Moneytree to provide consumer redress and to pay a civil penalty to the agency’s Civil Penalty Fund.
| Remedy Type | Amount | Who Benefits / Purpose |
|---|---|---|
| Consumer redress | Approximately $255,000 | Consumers who paid more than the advertised check-cashing fee, received deceptive collection letters, or incurred fees due to unauthorized debits. |
| Civil money penalty | $250,000 | Paid to the CFPB’s Civil Penalty Fund, which can be used for payments to harmed consumers and consumer education. |
In addition to the monetary components, the order required Moneytree to stop the unlawful practices and to comply with federal consumer financial law going forward.
Relevant Laws and Regulatory Framework
The Moneytree action illustrates how multiple federal statutes work together to protect consumers in small-dollar lending markets.
- Dodd-Frank Act (Title X) – Grants the CFPB authority to take action against unfair, deceptive, or abusive acts or practices by covered persons and service providers.
- Electronic Fund Transfer Act (EFTA) – Governs electronic transfers of money, including ACH debits from consumer accounts. Regulation E, issued by the Federal Reserve and now implemented by the CFPB, requires written authorization for preauthorized electronic fund transfers.
The broader regulatory environment for payday lending has also involved rules setting underwriting standards and payment protections, though those rules have been the subject of significant revisions and litigation over time. The Moneytree order focuses narrowly on deceptive communications and unauthorized debits rather than on the underlying loan pricing itself.
What Consumers Can Learn from the Moneytree Case
For consumers who use or are considering using payday loans or check-cashing services, this case underscores several practical points:
1. Scrutinize advertised prices
- Look for percentage signs (%) and small-print disclosures in any advertisement for financial services.
- If a price seems unusually low, verify whether it is a flat fee or a percentage of the transaction amount.
- Ask staff to confirm the exact dollar cost before you agree to a transaction.
2. Be cautious about threats in collection letters
- If a lender threatens to repossess property, confirm whether your loan agreement actually lists that property as collateral.
- Unsecured loans generally do not give lenders the right to repossess your car or household goods.
- If a collection letter appears threatening or inaccurate, you can contact a reputable legal aid organization or your state attorney general’s office for guidance.
3. Monitor bank accounts for unauthorized debits
- Review your bank statements regularly to spot unexpected withdrawals.
- Keep a copy of any authorization you sign for electronic payments, including ACH debits.
- If you see a debit you did not authorize, notify your bank as soon as possible. Under EFTA, consumers have specific rights to challenge unauthorized transfers.
Compliance Lessons for Lenders and Fintech Firms
The Moneytree action also serves as a compliance case study for lenders, fintech firms, and other providers of consumer financial products.
- Advertising review and testing: Marketing materials should be reviewed by legal and compliance staff, and tested for how a typical consumer would interpret key terms, especially price.
- Accurate collection communications: Letters and scripts used in collections must accurately reflect borrowers’ legal obligations and the lender’s rights. False implications of repossession or legal action can constitute deception.
- Robust authorization procedures: Firms must have standardized procedures to obtain and retain written or comparable electronic authorization for any recurring debits, and should verify that templates include required language.
- Responsiveness to exam findings: The CFPB emphasized that some of the problems at Moneytree had been identified in earlier examinations but were not adequately fixed. Regulators typically view repeat or unaddressed issues as aggravating factors when determining penalties.
Comparison: Key Misconduct and Related Legal Duties
| Conduct | Consumer Harm Risk | Relevant Legal Duty |
|---|---|---|
| Advertising a fee as “1.99” without clarifying it is a percent | Consumers underestimate costs and may pay more than expected | Avoid deceptive acts or practices in marketing under Dodd-Frank UDAAP authority |
| Threatening vehicle repossession for unsecured loans | Borrowers fear loss of essential transportation and may feel coerced into payments | Prohibit misleading representations in collections, including threats that cannot legally be carried out |
| Processing ACH debits without valid written authorization | Unexpected withdrawals, overdraft fees, and account instability | Comply with EFTA and Regulation E requirements for preauthorized electronic fund transfers |
Frequently Asked Questions (FAQs)
Q1: What is the CFPB and what does it do?
The Consumer Financial Protection Bureau is a U.S. federal agency created after the 2008 financial crisis to regulate consumer financial products such as mortgages, credit cards, payday loans, and bank accounts. It writes rules, supervises institutions, and brings enforcement actions when companies violate federal consumer financial laws.
Q2: Did the CFPB shut Moneytree down?
No. In this case, the CFPB ordered Moneytree to provide refunds to affected consumers, pay a civil penalty, and stop the specific unlawful practices identified in the consent order. The action did not require the company to cease operations entirely.
Q3: How can I tell if a fee in an advertisement is a flat amount or a percentage?
Look for a percent sign (%) or words like “percent” or “of the amount.” If an ad simply shows a number such as “1.99” without clear context, ask the company directly whether that is a flat dollar fee or a percentage of the transaction. If the answer is unclear or confusing, consider it a warning sign.
Q4: What should I do if a lender takes money from my account without my permission?
Contact your bank immediately to report the unauthorized debit and ask about your rights under the Electronic Fund Transfer Act. Then contact the lender to dispute the charge in writing and keep copies of all communications. You may also submit a complaint to the CFPB or your state regulator if the issue is not resolved.
Q5: Are payday loans always illegal or abusive?
Payday loans are legal in many states but often come with very high fees or interest rates and short repayment periods. Regulators and consumer advocates frequently express concern that these loans can trap borrowers in cycles of debt, especially when they are repeatedly rolled over or refinanced. The legality and terms depend on state law, but deceptive marketing or unauthorized debits are prohibited regardless of loan type.
References
- CFPB Takes Action Against Moneytree for Deceptive Advertising and Collection Practices — Consumer Financial Protection Bureau. 2016-12-16. https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-moneytree-deceptive-advertising-and-collection-practices/
- Moneytree, Inc. – Enforcement Action — Consumer Financial Protection Bureau. 2016-12-16. https://www.consumerfinance.gov/enforcement/actions/moneytree-inc/
- CFPB Issues Consent Order Against Moneytree for Deceptive Advertising and Debt Collection Practices — Goodwin Procter LLP. 2016-12-21. https://www.goodwinlaw.com/en/insights/blogs/2016/12/cfpb-issues-consent-order-against-moneytree-for-de
- Moneytree — Background article, referencing regulatory actions and payday lending practices. Last updated 2022. https://en.wikipedia.org/wiki/Moneytree
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