On October 17, the U.S. District Court for the Central District of California denied a peer-to-peer lending platform’s motion to dismiss a lawsuit brought by the CFPB. The Bureau had filed a First Amended Complaint alleging the platform engaged in deceptive advertising, provided deceptive disclosures and documents, violated UDAAP by servicing and collecting loans that were allegedly uncollectable under state laws, and violated the FCRA when it purportedly failed to enact reasonable measures to ensure the accuracy of prospective borrowers’ company specific scores. The lending platform moved to dismiss, arguing that the Bureau’s funding was improper and that its claims lacked merit.

The court addressed the platform’s argument that the CFPB’s funding from the Fed was illegitimate due to the Fed’s current lack of surplus funds, which the platform argued violated the Appropriations Clause. However, the court rejected this argument, noting that “the [c]ourt need not determine how to interpret [the statute of the funding mechanism]… since [the platform] has not persuaded the court that the Bureau’s source of funding—even if illegitimate—is grounds for dismissal.”

In evaluating the plausibility of the CFPB’s claims, the court found the Bureau had sufficiently alleged the platform’s advertising of “no interest” loans were misleading, as borrowers typically paid tips and donations, which the Bureau alleged functioned as finance charges. Additionally, the court refused to dismiss the Bureau’s claims that the platform violated state licensing requirements and usury caps, and that the platform failed to ensure the accuracy of consumer credit information in violation of the FCRA.