Massachusetts AG Forces Fintech From State As Part Of "True Lender" Settlement

On May 21, the Massachusetts Attorney General entered into an Assurance of Discontinuance ("AOD") with a California-based fintech alleging that it was the "true lender" of its consumer installment loans.Under the terms of the settlement, the fintech is required to pay $625,000 in restitution, request deletion of tradelines on credit reports for loans reported to credit bureaus, and cease doing business in the state.

The fintech, which partnered with a Utah-based bank, made short-term, small dollar loans to Massachusetts consumers with interest rates that exceeded the state's rate cap.The Massachusetts AG alleged the fintech made loans with an annual APR that routinely exceeded 100%.Under Massachusetts law, loans greater than $6,000 (commercial or consumer) are generally subject to a 20% interest rate cap with limited exceptions and require the state AG's approval to charge an amount greater than 20%. See Mass. Gen. Laws Ann. ch. 271, § 49(a). Moreover, consumer