Yes, Avant Loans charged consumers unauthorized processing fees that directly violated the Electronic Fund Transfer Act (EFTA), and the Federal Trade Commission took action. In April 2019, the FTC ordered Avant to pay a $3.85 million settlement after finding the company had systematically charged consumers without proper authorization, sometimes debiting their bank accounts multiple times in a single day—in one extreme case, a borrower was debited 11 times within 24 hours. By January 2022, the FTC distributed over $3.7 million in refunds to 17,367 harmed consumers. This article explains how Avant’s fee practices violated federal law, what specific harms consumers experienced, how the settlement resolved the case, and what you need to know if you borrowed from Avant during the violations period.
Table of Contents
- What Were Avant’s Processing Fees and How Did They Violate the Electronic Fund Transfer Act?
- How These Unauthorized Charges Harmed Consumers Beyond the Fees Themselves
- The Specific Violations—What Exactly Did Avant Charge Without Authorization?
- Understanding Your Rights Under the Electronic Fund Transfer Act
- How the Settlement Resolved Avant’s Violations and What Protections It Imposed
- The Settlement Payout and How Consumers Received Refunds
- Lessons Learned—What This Settlement Reveals About Consumer Protections in Online Lending
What Were Avant’s Processing Fees and How Did They Violate the Electronic Fund Transfer Act?
Avant required borrowers to authorize electronic fund transfers (EFTs) as their only method of payment—a condition that itself violated EFTA, which prohibits lenders from conditioning credit on how consumers choose to pay. More specifically, Avant charged various fees tied to these electronic transfers, but the company systematically deducted amounts without valid authorization or exceeded the amounts borrowers had authorized. The EFTA violation centered on the fact that the company essentially forced consumers into a single payment method that included unauthorized charges, effectively depriving them of legal protection and choice.
Unlike the Electronic Fund Transfer Act’s framework, which requires clear written authorization before debiting an account, Avant treated its authorization terms as a blank check to make charges beyond what consumers explicitly agreed to pay. The company’s practices were particularly aggressive because Avant used remotely created checks (RCCs) as a secondary collection method—another practice prohibited under the EFTA settlements. By requiring preauthorized electronic transfers as the only alternative to illegal RCCs, Avant trapped consumers in a system where they could not control which bills got paid, when they got paid, or by how much. This violated a core consumer protection: the right to establish limits on electronic payments and dispute unauthorized transfers.
How These Unauthorized Charges Harmed Consumers Beyond the Fees Themselves
The damage extended far beyond the unauthorized fees appearing on bank statements. When Avant delayed depositing checks from borrowers (sometimes by days or weeks), the delayed posting of legitimate payments meant that regular bills bounced, triggering overdraft fees, late fees, and interest charges from the consumer’s own financial institutions. A single unauthorized charge could cascade into hundreds of dollars in secondary fees—a consumer might face a $35 overdraft fee from their bank, a $25 late fee from a credit card company, and accruing interest, all triggered by Avant’s delayed or unauthorized debit.
Even more damaging was Avant’s practice of reporting loans as delinquent to credit bureaus even when consumers had paid the quoted payoff amount in full. A consumer who paid off what Avant told them was the complete balance could discover weeks later that the loan was reported as late or unpaid because Avant later claimed additional charges were owed. This harmed credit scores, making it harder and more expensive for consumers to secure mortgages, car loans, or even rental housing. However, if you were one of the affected borrowers and had your credit damaged by these false delinquency reports, the settlement allowed for dispute claims and documentation of harm.
The Specific Violations—What Exactly Did Avant Charge Without Authorization?
Avant’s charging practices fell into several categories, all of which violated EFTA and the Dodd-Frank Act’s prohibition on unfair, deceptive, or abusive acts. The company charged payments exceeding the amounts borrowers had authorized—a borrower might authorize a $200 payment but find $215 debited. Avant duplicated payments without authorization, sometimes within hours of an initial charge. In the most egregious documented case, a single consumer was debited 11 times in one day, representing multiple unauthorized attempts to collect the same debt or different charges piled onto each other without clear authorization.
These practices weren’t isolated errors—they were systematic. The FTC’s investigation found that thousands of consumers experienced these overages and duplicates. Avant’s internal systems either failed to prevent duplicate charges or were deliberately designed to maximize revenue extraction from borrower accounts. The company didn’t simply charge extra processing fees; it charged charges without proper authorization altogether, then added insult by reporting the accounts as delinquent when consumers disputed or couldn’t cover the inflated debits.
Understanding Your Rights Under the Electronic Fund Transfer Act
The EFTA grants consumers specific protections that Avant violated systematically. You have the right to authorize electronic transfers in writing, with clear terms about the amount, frequency, and date of each transfer. You have the right to dispute unauthorized transfers within 60 days of the transfer appearing on your statement, and your financial institution must investigate and provisionally credit your account within 10 business days. You also have the right to stop a recurring preauthorized transfer by giving written notice at least three business days before the scheduled date.
Critically, no creditor can condition the extension of credit on your choice of payment method. Avant’s requirement that you use electronic transfers instead of other payment options—or its conditioning of favorable terms on electronic payment—itself violated EFTA. If you were forced to use electronic transfers with Avant while other borrowers had payment options, or if you were charged extra for using alternative methods, that was a legal violation. However, if you simply chose electronic payment and authorized standard fees, those authorized charges wouldn’t themselves be violations—it’s the unauthorized overages and duplicates that crossed the line.
How the Settlement Resolved Avant’s Violations and What Protections It Imposed
The April 2019 FTC settlement order imposed specific, enforceable constraints on Avant’s future lending practices. The company was prohibited from taking unauthorized payments—this seems obvious, but it required explicit language because Avant’s previous authorization terms were so vague. Avant was prohibited from using remotely created checks (RCCs) entirely, closing the secondary collection method that trapped consumers without payment choices. The settlement required Avant to post all payments within 3 business days of receipt, eliminating the delays that cascaded into overdraft fees and credit damage.
Avant was also required to provide written payoff quotes with good-through dates within one business day of request—a transparency requirement that prevents the “you paid it off but we’re reporting you delinquent” scenario that harmed credit scores. A significant limitation, however, is that these protections only apply to Avant going forward; they don’t automatically extend to other online lenders or payday loan companies operating under similar practices. If you borrowed from another lender and experienced the same unauthorized charges or delayed posting, you would need separate action or settlements against that specific company. The Avant settlement also doesn’t prevent the company from later changing its business model or finding technical loopholes in the consent order’s language—ongoing FTC monitoring is required to ensure compliance.
The Settlement Payout and How Consumers Received Refunds
The $3.85 million settlement was structured as equitable monetary relief, with the FTC handling the distribution directly rather than requiring affected borrowers to submit detailed claims. By January 2022, the FTC had distributed $3.7 million to 17,367 consumers, averaging approximately $213 per consumer, though individual amounts varied based on the documented harm.
Some consumers received checks for the full amount of unauthorized charges; others received partial compensation based on the severity and documentation of their harm. The FTC mailed physical checks to identified victims rather than requiring complex claim forms, making the process straightforward for most affected consumers. However, if you never received a refund check and believe you were harmed by Avant’s practices (you borrowed between approximately 2010-2019, the primary period of violations), you can file a complaint with the FTC directly or contact the agency to verify whether your claim was processed.
Lessons Learned—What This Settlement Reveals About Consumer Protections in Online Lending
The Avant settlement became a benchmark case for how the FTC approaches online lending violations. It demonstrated that even growth-stage fintech companies can’t escape accountability for EFTA violations, and that the FTC takes seriously the requirement that lenders can’t condition credit on payment method. The case also highlighted gaps in enforcement: Avant operated for years with systematic charging violations before regulatory action, suggesting that many smaller online lenders may currently be operating with similar practices undetected.
The settlement has influenced how other online lenders handle payments and authorization going forward. However, new lending platforms continue to emerge with terms-of-service language designed to claim broad authorization, and consumer protection advocates note that regulatory action remains reactive rather than preventive. The Avant case suggests that if you’re using any online lending platform, you should monitor your account for unauthorized charges, request transparent payoff quotes in writing, and don’t assume that authorization language in a loan agreement permits unlimited charges.