Tempoe penalized for hiding terms of leasing contracts
A company that offered lease-purchase financing for customers of retailers such as Sears and Kmart has been fined $36 million for unlawful practices that cost consumers as much as $192 million.
The Consumer Financial Protection Bureau (CFPB) has taken action against Tempoe, an Ohio-based nonbank lender that offered retail product financing to customers who did not qualify for traditional credit.
“Tempoe’s business model trapped consumers into contracts that required them to pay far above market price for goods and services,” said CFPB Director Rohit Chopra. “Today's order permanently bans Tempoe from offering such agreements.”
As part of the enforcement action, Tempoe will be forced to let customers keep merchandise with no further payments. This release of leases represents more than $33 million in potential fees.
According to the CFPB, more than 325,000 consumers were charged more than $192 million in unlawful fees when their contract extended beyond six months.
Tempoe failed to disclose the full terms of the lease-purchase contracts as required by law. Additionally, Tempoe ultimately forced consumers to purchase certain items at higher than market value if the customer no longer wished to continue the lease contract after an initial five month term.
Tempoe purchased personal property and services from retailers and then leased them to consumers. Typically, consumers were offered Tempoe’s product after applying and being rejected for conventional financing when trying to make a purchase at a retailer. Consumers made periodic payments for an initial term of five months, after which they had to decide whether to purchase the items with a large additional payment, or return the property and receive nothing in return. Consumers were offered leases for items such as auto parts, large home appliances, furniture, toys, and jewelry. 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.