Snap Finance Sued for Deceiving, Bullying Consumers

Lease-purchase financing company allegedly used deceptive tactics and made illegal threats to borrowers

The Consumer Financial Protection Bureau (CFPB) is suing Snap Finance for alleged illegal activity including using deceptive marketing tactics and making false threats to consumers.

Snap Finance, based in Utah, is a consumer finance company that partners with thousands of merchants nationwide to offer, market, and underwrite “rental-purchase” or “lease-purchase” agreements to consumers. Snap issues financing agreements to consumers purchasing products and services such as furniture and appliances, mattresses, auto parts and repairs, auto electronics, and jewelry.

The allegations against Snap include that the company has offered and provided millions of “lease-purchase” and “rental-purchase” financing agreements in ways that have harmed consumers, including through misleading advertisements, insufficient disclosures, and interfering with consumers’ ability to understand the terms and conditions of its financing agreements. The CFPB further alleges Snap Finance’s illegal conduct continued in its servicing of those agreements, including misrepresenting consumers’ payment obligations and making false threats in collections.

“Snap Finance illegally obscured terms and conditions of their so-called 'rental purchase agreements,' which led to exorbitant charges,” said CFPB Director Rohit Chopra. “To ensure fair competition and to protect the public, the CFPB is carefully watching lending outfits operating outside of the traditional banking system.” 

The CFPB notes that Snap's marketing relied on deception to convince consumers to sign-up for the lease-purchase or "rent-to-own" agreements.

According to the CFPB, Snap Finance aggressively marketed its financing with advertisements that misled consumers as to the nature of the financing arrangement and failed to disclose the true costs customers would incur. In-store promotional materials provided by Snap Finance advertised a “100 Day Cash Payoff,” which led consumers to believe they had entered into a 100-day financing agreement. In fact, consumers were automatically entered into 12 months of payments, which typically involve total payments that amount to more than double the cash price of the financed merchandise or service.

The company also engaged in aggressive and illegal collections practices, including making threats of legal action and including misrepresenting customer payment obligations, even attempting to collect from customers who had already completed their payments or from customers who had not yet received their product.

The CFPB complaint seeks monetary refunds for impacted consumers as well as a civil money penalty against Snap.

Photo byMarkus SpiskeonUnsplash