Connecticut will receive $15,000 as part of a $35 million multi-state settlement reached with Ohio-based nonbank consumer finance company Tempoe, LLC. As part of the settlement, Tempoe is also permanently banned from offering consumer leases.
The Consumer Financial Protection Bureau (CFPB) recently announced it had taken enforcement action against the company on September 11 in a parallel $36 million settlement after finding Tempoe’s leasing practices violated the Consumer Financial Protection Act of 2010.
According to the CFPB, Tempoe purchased personal property and services from retailers and sold them to consumers, many of whom had been “rejected for conventional financing” through the retailer.
“Then, unless the consumers made an active selection to purchase or return the property, Tempoe continued auto-debiting the consumers for the full month-to-month term of the contract, typically 18 to 36 months. Some consumers discovered only at the conclusion of their initial term that they did not own their items and were required to pay more.” the CFPB found.
Consumers were offered leases for items such as home appliances, furniture, jewelry, auto parts, and toys. “Tempoe would pay the retailer for the item, charge the consumer an initial payment at the point of sale, and then charge additional payments on a bi-weekly or monthly basis.” the CFPB noted.
Additionally, Tempoe failed to provide required disclosures for leases extending beyond an initial term of six months or more.
The company, which worked with retailers such as Sears and Kmart, tricked consumers into signing leases by leading them to believe they were signing up for installment plans when they were actually entering lease agreements. As a result, “consumers found themselves unable to return products and on the hook for unexpectedly large payments.”
CFPB’s enforcement action not only permanently bans the company from providing consumer leases but also requires them to release all existing consumers from their lease agreements and allow them to maintain leased products without further financial obligation.
Across the 41 states plus the District of Columbia that are part of the settlement, this accounts for around 19,300 leases with an aggregate value of roughly $33 million.
Tempoe is also required to pay a $2 million penalty: $1 million paid to states involved in the settlement and $1 million to the CFPB’s victim relief fund.
According to a press release from Attorney General William Tong’s office, consumers with existing leases do not need to take any action as their accounts with Tempoe have already been canceled as part of the settlement.
The rest of New England’s states will also receive money through the settlement. New Hampshire, where Tempoe primarily conducts business from Manchester, was part of the multistate executive committee that led the settlement reached by the states.