Loan Doctor Ordered to Pay $19 Million in Fake Account Scandal

Advocate Andy

Consumer Bureau takes action against lender who offered who marketed risky investments as high-yield savings accounts

The Consumer Financial Protection Bureau (CFBP) has an issued an order requiring a company known as Loan Doctor to refund $19 million to consumers defrauded in an investment scheme.

According to the CFPB, Loan Doctor marketed its products as a high-yield savings account netting 5% or more in APY. In reality, the funds deposited were not FDIC insured and were used to fund an investment scheme involving purchasing crypto assets.

“Loan Doctor and its founder masqueraded as a traditional bank to open accounts for people seeking a high-yield savings product,” said CFPB Director Rohit Chopra. “In reality, this outfit and its ringleader were using customer funds for risky investments.”

The CFPB alleges that Loan Doctor represented that:

  • Customer deposits would originate loans for healthcare professionals: Loan Doctor and Radjabli told depositors that when it originated a loan, it would have an investor lined up to purchase it. In fact, Loan Doctor never used the deposits to originate loans for healthcare professionals, and it never entered into a contract with a buyer or investor to purchase a loan.
  • Customer deposits would be secure: Loan Doctor represented that when not being used to originate loans, deposited funds would be held in an FDIC-insured account or an account insured by Lloyd’s of London, or backed by a “cash alternative” or “cash equivalent.” Loan Doctor also stated that it maintained a cash reserve in an amount equivalent to the amount customers deposited. CFPB’s investigation found that Radjabli instead placed funds in a hedge fund he controlled and in crypto-assets, such as Celsius Network. Deposited funds were also invested in actively traded securities or loaned, through a third party, to investors using individual stock portfolios as collateral.
  • Loan Doctor was a commercial bank: Loan Doctor misled customers to believe they were depositing their funds into accounts like traditional savings accounts that had guaranteed returns. In fact, Loan Doctor was not a commercial bank, and depositors’ funds were invested in volatile securities or securities-backed investments.
  • Healthcare Finance High-Yield CD accounts had a record of paying high interest rates: Loan Doctor stated that the accounts paid interest at rates between 5% and 6.25% in years prior to 2019. In fact, Loan Doctor did not begin taking consumer deposits until August 2019.

The enforcement action against Loan Doctor requires the company to:

  • Refund approximately $19 million to approximately 400 depositors: The defendants would have to return the money that each affected person deposited into a Loan Doctor Healthcare Finance High Yield CD account, and in a manner consistent with the advertised terms of the product – namely, the principal along with an average per year interest rate of about 6%.
  • Stop engaging in deposit taking activities: The defendants would be permanently banned from engaging or assisting others in any deposit taking activities.
  • Pay a $391,530 fine: The order would require defendants to pay a civil money penalty to the CFPB in the amount of $391,530. A portion of that penalty, $241,530, will be remitted because the defendants paid that amount in penalties to the SEC due to a similar action brought by that agency. The remainder of the penalty would be deposited into the CFPB’s victims relief fund.

Want more consumer finance news? Check out my newsletter!

Comments / 0

Published by

Andy Spears is a middle Tennessee writer and policy advocate. He reports on news around public policy issues - education, health care, consumer protection, and more.

Nashville, TN

More from Advocate Andy

Comments / 0