Lender Liable for Conditioning Extension of Credit on Borrowers’ Repayment by EFT
August 25, 2014
A federal district court’s decision serves as a reminder to creditors not to condition the extension of credit on a borrower’s repayment by means of preauthorized electronic fund transfers. In De La Torre v. CashCall, the lender was found to have violated the Electronic Funds Transfer Act and Regulation E even though in its agreement the borrower was permitted to cancel the authorization at any time, including before the first loan payment is due. CashCall was liable because it did not approve a loan application if the applicant did not authorize the EFT feature. See CBA’s Regulatory Compliance Bulletin for more information.