On December 1, 2022, the CFPB took action against Loan Doctor to resolve the CFPB’s claims that the company and its founder, Edgar Radjabli, broke the law by deceiving consumers into thinking they were depositing funds into a guaranteed return savings product within a commercial bank. The CFPB alleges that Loan Doctor and Radjabli 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% and 6.25%.
From CFPB Director Rohit Chopra’s statement:
“Loan Doctor and its founder masqueraded as a traditional bank to open accounts for people seeking a high-yield savings product. In reality, this outfit and its ringleader were using customer funds for risky investments.”
Loan Doctor is is a Delaware financial services company operating in West Palm Beach, Florida, and New York City, where it took millions of dollars from at least 400 individuals who opened and deposited money into Loan Doctor’s deceptively advertised savings product. The company offers customers a Healthcare Finance Savings CD account that would yield, according to the company, “the highest return of any savings product in the US.” According to the CFPB, Loan Doctor and Radjabli made several false, misleading, and inaccurate marketing representations in advertising, in particular, it falsely represented that:
Customer deposits would originate loans for healthcare professionals. 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.” CFPB found that Radjabli instead placed funds in a hedge fund and in crypto-assets, invested in actively traded securities or loaned to investors using individual stock portfolios as collateral.
Loan Doctor was a commercial bank. 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% and 6.25% in years prior to 2019 but in reality, it did not begin taking consumer deposits until August 2019.
If approved by the court, the proposed settlement would require Loan Doctor and Radjabli to:
Refund approximately $19 million to approximately 400 depositors;
Stop engaging in deposit taking activities; and
Pay a $391,530 fine.
Read the CFPB’s press release here.
The proposed order can be found here.