GreenSky has been fined $ 2.5 million and forced to repay up to $ 9 million in loans the fintech allegedly allowed its trading partners on behalf of customers who did not approve the funding, the company said Consumer Financial Protection Bureau on Monday with.
The Atlanta-based company offers technology vendors to offer consumers point-of-sale installment loans that are largely funded by their partner banks. GreenSky initially enabled home finance through retailers like Home Depot, but has since expanded to other areas, including elective surgery.
From 2014 to 2019, GreenSky received more than 6,000 complaints from customers claiming they did not authorize a loan application to be submitted, according to CFPB.
CFPB investigators confirmed that in around 1,600 of these cases, the trader was responsible for submitting a loan application without the borrower’s consent. Acting director of the CFPB, Dave Uejio, said in a press release on Monday announcing the consent order that GreenSky was “negligent” in allowing its trading partners to take advantage of consumers.
Some consumers claimed they had never heard of GreenSky until the mail bills for their loan payments came in. In some cases, GreenSky worked with borrowers to resolve the issues, but there have been at least 2,800 cases where the consumer who complained about an unauthorized loan received neither a refund nor a write-off, according to CFPB Consent order.
“It is just wrong for consumers to go into debt with GreenSky for loans they did not know about,” said Uejio.
GreenSky did not immediately respond to a request for comment.
GreenSky gives merchants the ability to collect financial information through its software and to issue loans on behalf of customers. Written confirmation from the borrower is required prior to submitting loan applications, but the CFPB alleged that GreenSky did not verify the adequacy of these documents until a consumer filed a complaint under the consent order.
According to the agreement with the CFPB, GreenSky must now obtain proof of the borrower’s authorization before activating the loan.
Bureau investigators also found that prior to October 2019, GreenSky allegedly allowed traders to submit loan applications for up to two months before going through a mandatory training program. The company is obliged to make changes to its training regulations by order of the CFPB.
GreenSky’s in-house trading risk division also proved more lenient in examining loan applications submitted by its largest trading partners, according to CFPB.
In some cases, Merchant Risk employees have allegedly been directed to “change their recommendations on traders’ suspensions and terminations based on a trader’s volume of business,” the CFPB Consent Order read.
In about 100 cases examined by the CFPB, a resolution was not reached for more than six months, the office found. Under the agreement, GreenSky is required to dedicate staff to its Complaints Department and to adhere to clear timelines for resolving disputes, including providing a “preliminary account credit” within five days of receiving a complaint until the issue is resolved.