The Consumer Financial Protection Bureau (CFPB) has fined consumer finance company Tempoe $36 million for "tricking" consumers into signing leasing agreements by concealing the contract terms and costs, and for failure to provide legally required disclosures.
Forty-one states and the District of Columbia are also entering into a parallel multi-state settlement addressing the same conduct. Some $2 million of the $36 million will be split evenly between those entities and the CFPB’s victims relief fund, the CFPB said.
The penalty is the latest action that the federal consumer watchdog group has brought against companies for illegal activities so far this year. In the last month, for example, the CFPB has sued installment lending conglomerate Heights Finance Holding, reached settlements with credit repair firms Lexington Law and CreditRepair.com, and brought charges against Freedom Mortgage for illegal kickbacks.
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In the Tempoe case, the CFPB has permanently banned the company from offering consumer leases. It has also ordered Tempoe to close each of its outstanding consumer accounts and allow customers to keep their leased merchandise with no further payments. This includes about 19,300 leases with an aggregate remaining balance of approximately $33.6 million.
"Tempoe’s business model trapped consumers into contracts that required them to pay far above market price for goods and services," CFPB Director Rohit Chopra said in a statement.
Company worked with retailers nationwide
Tempoe, described as a nonbank specialty consumer finance company, offered lease agreements primarily through partnerships with retailers nationwide. Between 2015 and 2022, Tempoe entered into 1.85 million financial agreements with consumers. Customers of retailers including Sears and Kmart were "kept in the dark" about costly contract terms, the agency said.
According to the CFPB, this is how it worked: The company would purchase personal property or services – such as auto parts, large home appliances, furniture, toys or jewelry – from retailers, which it then leased to consumers. These consumers were typically offered Tempoe’s products after being rejected for conventional financing when trying to buy them at a retailer.
Consumers would be charged an initial payment at the point of sale and then be charged additional payments on a bi-weekly or monthly basis, the CFPB said. This is commonly referred to as Buy Now, Pay Later.
Following an investigation, the CFPB said it found several problems including that Tempoe concealed the terms of its lease agreements. Some consumers discovered only as their initial term ended that they did not own their items and were required to pay significantly more for those items, CFPB said.
In total, Tempoe generated about $192 million in revenues from about 325,000 consumers from this unlawful conduct, the agency said.
Consumers can submit complaints about financial products or services on the CFPB’s website.
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