CFPB to Loan Doctor: Take your medicine

by Ryan Smith09 Jul 2020

The Consumer Financial Protection Bureau is suing a Delaware-based financial-services company for deceiving customers who deposited more than $15 million into a deceptively advertised product.

My Loan Doctor (d/b/a Loan Doctor) advertises itself as a company that originates loans for healthcare professionals to buy commercial real estate, acquire a practice or refinance student loans. The CFPB alleges that Loan Doctor and its founder, Edward Radjabli, “made several false, misleading, and inaccurate marketing representations” in advertising the company’s “Healthcare Finance (HCF) Savings CD Account”. The bureau alleged that Loan Doctor violated the Consumer Financial Protection Act’s prohibition against deceptive practices, taking more than $15 million from at least 400 customers.

According to the CFPB, Loan Doctor and Radjabli said that money consumers deposited into the HCF High Yield CD Accounts would be used to originate loans to healthcare professionals – and that Loan Doctor would have investors lined up to purchase the loan before it was made. Loan Doctor’s website claimed that unlike a bank, “which must account for defaults on the loans it issues, Loan Doctor’s ability to immediately resell the loans ensures that it is not exposed to defaults.”

The CFPB said that Loan Doctor’s website claimed that it had “helped over 3500 doctors nationwide” and originated more than $500 million in loans (currently, the website claims “3,600+ happy doctors” and more than $650 million in “loans facilitated”). The bureau’s lawsuit also said that the website referred to Loan Doctor’s “trusted lending partners” and listed specific banks. Currently, the site lists banks including Citi, PNC and Bank of America as “trusted lending partners.”

“But Loan Doctor never used the money invested in its HCF High Yield CD Accounts to originate loans for healthcare professionals,” the CFPB said in its lawsuit. “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 CFPB also said that the company falsely claimed that the money deposited into the 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 that the company would maintain a cash reserve equivalent to the amount consumers deposited. However, “consumers’ deposits were invested in actively traded securities or loaned, through a third party, to investors using individual stock portfolios as collateral,” the CFPB said.

Loan Doctor and Radjabli also told consumers that Loan Doctor was a commercial bank, and that their deposits were safe and comparable to a traditional savings account with a guaranteed return. In point of fact, Loan Doctor was not a commercial bank, and it invested its customers’ money in volatile securities or securities-backed investments, the CFPB said.

The company further claimed that its HCF High Yield CD Accounts paid interest at rates between 5% and 6.25%in the years before 2019. However, Loan Doctor didn’t start its business until July 2019 and didn’t even begin taking consumer deposits until August of that year, the bureau said.

When the CFPB began investigating the company in March, it requested that Loan Doctor stop offering its HCF High Yield CD product and remove all marketing for the product from its website. The company “partially complied,” according to the lawsuit, removing new offerings of the CD from its website.

“But Loan Doctor did not cease operating,” the lawsuit said. “Instead, 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.”

Radjabli allegedly tried to deceive those advisors, making no reference to the CFPB’s investigation in his communications with them. Instead, he said in an email that the company’s “lending partners” objected to Loan Doctor having 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,” Radjabli said.

The CFPB is asking the court to enjoin Loan Doctor from making further false statements, pay damages, pay redress to affected consumers, forfeit any ill-gotten gains, and pay a civil money penalty and court costs.

Currently, the “HCF High Yield CD Account” section on Loan Doctor’s website simply features an icon that reads, “Status: closed.”