The Consumer Financial Protection Bureau filed suit in New York against a financial-services company doing business as Loan Doctor, saying the company took money from healthcare professionals who expected to invest in a savings certificate of deposit account, but never did.
The bureau charged the company with four violations of the deceptive prong of the agency’s UDAAP authority in filing the lawsuit.
In the lawsuit against My Loan Doctor LLC, and its founder, Edgar Radjabli, the CFPB charged that the company made several false, misleading and inaccurate representations about its product, a “Healthcare Finance (HCF) Savings CD Account.”
Starting in August 2019, Loan Doctor took more than $15 million from at least 400 consumers who opened and deposited money into Loan Doctor’s product, believing the money would be used to originate loans for healthcare professionals.
“Loan Doctor never used the money invested in its HCF High Yield CD Accounts to originate loans for healthcare professionals,” the CFPB lawsuit stated. “In fact, Loan Doctor never originated a loan for a healthcare professional. Loan Doctor never sold a loan to a bank or secondary-market investor. Loan Doctor never entered into any contracts to sell at a future date to buyers or investors a loan that it originated.”
The case, filed in the Southern District of New York, alleged four deceptive acts or practices:
- Loan Doctor and Radjabli falsely represented that the money consumers deposited into Loan Doctor’s HCF High Yield CD Accounts would be used to originate loans for healthcare professionals and that Loan Doctor, before making a loan, would have an investor lined up to purchase it after it was made.
- Loan Doctor and Radjabli falsely represented that the money consumers deposited into Loan Doctor’s HCF High Yield CD Accounts, when not being used to originate loans, would be held in an FDIC-insured account, an account insured by Lloyd’s of London, or a “cash alternative” or “cash equivalent,” and, further, that Loan Doctor would maintain a cash reserve in an amount “equivalent to” the amount consumers deposited; in fact, consumers’ deposits were invested in actively traded securities or loaned, through a third party, to investors using individual stock portfolios as collateral.
- Loan Doctor and Radjabli falsely represented that Loan Doctor was a commercial bank and that consumers’ deposits were safe and comparable to a traditional savings account with a guaranteed return; in fact, Loan Doctor was not a commercial bank, and consumers’ deposits were invested in volatile securities or securities-backed investments.
- Loan Doctor and Radjabli falsely represented that Loan Doctor’s HCF High Yield CD Accounts paid interest at rates between 5 percent and 6.25 percent in the years before 2019; in fact, Loan Doctor did not even begin taking consumer deposits until August 2019.
The complaint also alleged that the company’s activities continued even after the CFPB investigation was revealed.
“On March 20, 2020, the bureau requested that Loan Doctor cease offering its High Yield CD product to consumers and remove all marketing of the CD product from its website. On March 26, 2020, Loan Doctor partially heeded the bureau’s request, removing all new offerings of its CD product from its website. But Loan Doctor did not cease operating,” the complaint stated.
Instead, it stated, Radjabli contacted several financial advisors in an effort to continue to sell Loan Doctor’s High Yield CD product under a different name while still concealing its risks to consumers.
“In emails to those advisors, Radjabli made no mention of the bureau’s request that Loan Doctor cease offering and marketing its CD product and stop taking any new deposits from consumers,” the complaint stated. “Rather, Radjabli explained: ‘Our lending partners (who are big banks, mostly) have decided they do not like that we have a CD program because it competes with the savings products they offer. … So we’ve been basically given an ultimatum … which is: don’t advertise/call it a CD or they will not work with us on the lending side. … [T]he investment has to be called something that does not resemble a banking product.’ ”
The complaint stated that Radjabli sought the advisors’ help to find a name for Loan Doctor’s product “that conveys the security, predictable income, imperviousness to stock market volatility etc. of the product but without sounding like a bank product.”
The CFPB asked the district court for redress for consumers, an injunction, and the imposition of civil money penalties.