The Consumer Financial Protection Bureau, in conjunction with 41 different states and the District of Columbia, yesterday announced an enforcement action with a consumer finance company that was accused of tricking consumers who were seeking financing at retail operations into signing leases that left consumers unable to return the merchandise. The company has been permanently banned from offering consumer leases, has been ordered to close all of its outstanding accounts, and allowing consumers to keep leased merchandise without making any further payments, which represents about $34 million. The company is also required to pay a $2 million fine, half of which will go to the CFPB and half of which will go to the states that entered into the settlement.
A copy of the consent order with Tempoe can be accessed by clicking here.
The company purchased property and services like auto parts, furniture, and home appliances from retailers like Sears and Kmart. When consumers would apply for credit and be rejected, that’s where Tempoe would step in. Consumers would make payments for five months after which they had to decide whether to purchase the item outright or return it.
The company was accused of concealing the terms of its lease agreements, trapping consumers with unreasonable return practices, and failing to provide legally required disclosures. Consumers who wanted to cancel their lease agreement were required to return the product back to Tempoe, but Tempoe did not accept returns of many items, including anything that cost less than $300, which forced consumers to exercise the purchase option on the lease, and pay “far higher” than the original price of the merchandise.
The company was accused of generating $192 million in revenue from 325,000 clients.
“Tempoe’s business model trapped consumers into contracts that required them to pay far above market price for goods and services,” said CFPB Director Rohit Chopra, in a statement. “Today’s order permanently bans Tempoe from offering such agreements.”
