The Consumer Financial Protection Bureau (CFPB) brought action against Loan Doctor to address claims that the company and its founder, Edgar Radjabi, violated consumer financial protection laws by deceiving consumers into thinking they were depositing funds into a guaranteed return savings product within a commercial bank.
According to the CFPB, Loan Doctor and Radjabi falsely represented that deposited funds would be used to originate loans for healthcare professionals, would be held in insured accounts or backed by cash alternatives, and would yield interest rates between 5 percent and 6.25 percent.
“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 a press release. “In reality, this outfit and its ringleader were using customer funds for risky investments.”
My Loan Doctor, which operated as Loan Doctor, operates in Florida and New York, purportedly offering customers a Healthcare Finance Savings CD account that would yield, according to the company, “the highest return of any savings product in the U.S.”
The CFPB alleged that Loan Doctor and Radjabi made several false, misleading, and inaccurate marketing representations in advertising Loan Doctor’s Healthcare Finance Savings CD account. Starting in August 2019, Loan Doctor took millions of dollars from at least 400 individuals who opened and deposited money into Loan Doctors advertised savings product.
The CFPB claimed that Loan Doctor and Radjabi specifically misrepresented that:
- Customer deposits would originate loans for healthcare professionals: Loan Doctor and Radjabi 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 Radjabi 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 percent and 6.25 percent in years prior to 2019. In fact, Loan Doctor did not begin taking consumer deposits until August 2019
The proposed settlement, if approved by the court, would require Loan Doctor and Radjabi to refund approximately $19 million to the approximately 400 depositors who attempted to utilize the Healthcare Finance High Yield CD account, stop engaging in deposit-taking activities, and pay a $391,530 fine to the CFPB.