The article “Consumer Protection Is Already Failing Americans” from Fintech Business Weekly offers a critical look at the current state of consumer protection within the U.S. fintech sector, focusing on recent scandals, regulatory failures, and the broader implications for individuals and the financial system.
TomoCredit Scandal
The article opens by detailing the TomoCredit controversy. TomoCredit, known for its “No FICO” credit card, encountered significant legal problems due to its mismanagement and deceptive practices. After defaulting on its debt with Silicon Valley Bank, TomoCredit turned to questionable schemes, such as charging consumers hundreds of dollars monthly to report fake tradelines (falsified credit histories), which artificially inflated customers’ credit scores. The company continued these practices even after credit bureaus intervened, and misleadingly implied ongoing Mastercard partnerships in marketing. Numerous lawsuits have accused TomoCredit of inaccurate credit reporting, aggressive debt collection tactics, and violations of federal and state consumer protection laws, including the Fair Credit Reporting Act, the Florida Telemarketing Act, and the Electronic Funds Transfer Act. Examples include reporting duplicate accounts, declaring fully paid accounts as delinquent, and attempting unauthorized ACH debits.
Regulatory and Ecosystem Failures
The article criticizes the roles of various stakeholders in allowing TomoCredit’s abuses to persist. Investors, bank partners (like Community Federal Savings Bank), card networks (Mastercard), credit bureaus, and federal and state regulators (notably the CFPB and FTC) are all cited for their lack of diligence, oversight, or meaningful intervention. Even when consumer complaints were numerous and credible, regulatory responses were minimal—most plaintiffs had to seek settlements rather than receive timely relief through government channels. The author argues that the power imbalance in financial services means robust consumer protections and recourse systems are needed, yet the current framework heavily favors institutional actors over individuals.
Mercury’s “Bereshit” Problem and Celtic Bank Lawsuit
The article transitions to other fintech failures. Mercury, a banking-as-a-service platform, is implicated in a money-laundering scandal where it and bank partner Choice Bank failed to adequately scrutinize a suspicious LLC (Bereshit Royalty), facilitating fraud and consumer loss. The story demonstrates that fintech platforms, often with inadequate Know-Your-Customer and Anti-Money Laundering controls, can be easy entry points for criminal activity.
Another case involves Celtic Bank, which is accused in a new lawsuit of engaging in conspiracy and racketeering related to franchise loan fraud. Celtic allegedly provided over $17 million in fraudulent SBA loans for a Ponzi-like franchise, benefiting from fees while ignoring obvious red flags and conflicts of interest.
Broader Implications
The article concludes with a reflection on the systemic risk of under-protecting consumers. It cites regulatory inertia and a prevailing attitude that accepts individual losses as a cost of doing business. It warns that a “move fast and break things” culture in fintech, without meaningful consumer protection, invites widespread harm. The author calls for stronger oversight, tougher enforcement, and a rebalancing of legal remedies to better protect ordinary Americans from both outright scams and subtle financial abuses.
Summary
In sum, the article argues that existing consumer protection measures in American fintech are inadequate, enabling abusive practices and systemic risks. The author advocates for reforms that would hold both fintechs and traditional financial actors accountable, ensuring genuine remedies are available to consumers harmed by their actions.
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