The Consumer Financial Protection Bureau (CFPB) has taken its first enforcement action against a payday lender by ordering Cash America International, Inc., to refund $14 million to consumers for allegedly robo-signing court documents in debt collection lawsuits. The CFPB also found that Cash America – one of the largest short term, small dollar lenders in the country – violated the Military Lending Act by illegally overcharging servicemembers and their families. Cash America will pay up to $14 million in refunds to consumers and it will pay a $5 million fine to settle these allegations and for allegedly destroying records in advance of the CFPB’s examination.
“This action brings justice to the Cash America customers who were affected by illegal robo-signing, and shows that we will vigilantly protect the consumer rights that servicemembers have earned,” said CFPB Director Richard Cordray. “We are also sending a clear message today to all companies under our watch that impeding a CFPB exam by destroying documents, withholding records, and instructing employees to mislead examiners is unacceptable.”
Cash America is a publicly traded financial services company headquartered in Fort Worth, Texas, that provides consumer financial products and services, including payday loans, lines of credit, installment loans, and pawn loans. With hundreds of retail locations across more than 20 states, it is one of the largest payday lending companies in the United States. Cash America’s Chicago-based subsidiary, Enova, offers online loans in 32 states under the brand name CashNetUSA.
The CFPB said that its action was the its first public enforcement action against a payday lender, its first public action under the Military Lending Act, and the first public action for a company’s failure to comply fully with the CFPB’s supervisory examination authority.
The CFPB said that, after its examination of Cash America’s operations, it found multiple violations of consumer financial protection laws, including:
· Robo-signing: For nearly five years, Cash America’s debt collection subsidiary in Ohio, Cashland Financial Services, Inc., had been preparing, executing, and notarizing documents filed in its Ohio collections litigations without complying with state and court-required signature rules. The CFPB estimates that about 14,000 consumers paid money as a result of debt collection litigation which may have involved reliance on improper court filings. Specifically:
o Employees manually stamped attorney signatures on legal pleadings, military-status affidavits, and consumer account paperwork without prior review; and
o Legal assistants notarized documents without following proper procedures.
· Illegally overcharged servicemembers: Cash America violated the Military Lending Act, which restricts the rate on certain types of loans given to servicemembers to 36 percent. Cash America extended payday loans exceeding that rate to more than 300 active-duty servicemembers or dependents.
· Impeded the CFPB exam: During a routine examination of Cash America that began in July 2012, the company, among other things, carelessly destroyed records relevant to the Bureau’s onsite compliance examination. Specifically, Cash America’s online lending subsidiary, Enova Financial:
o Instructed employees to limit the information they provided to the CFPB about their sales and marketing pitches;
o Deleted recorded phone calls with consumers;
o Continued to shred documents after the CFPB told them to halt such activities; and
o Withheld a report related to robo-signing practices.
Under the settlement, Cash America committed to:
· Refund consumers: Cash America has already voluntarily paid back roughly $6 million to military borrowers and victims of the robo-signing practices and will offer an additional $8 million to consumers, for a total refund of up to $14 million. Consumers who were subject to debt collection lawsuits in the state of Ohio from 2008 through January 2013 are eligible.
· Dismiss pending collections lawsuits: Within months of the CFPB discovering the robo-signing, Cash America dismissed pending collections lawsuits, terminated all post-judgment collections activities, cancelled all judgments obtained, and corrected information it furnished to credit bureaus for the nearly 14,000 wrongful cases filed in Ohio.
· Pay a $5 million fine: Cash America will pay a $5 million civil money penalty in connection with these serious violations. The CFPB said that Cash America’s preemptive refunds to consumers and other actions after the Bureau discovered the conduct were considered when determining the civil money penalty amount.
· Improve internal compliance systems: Cash America will develop and implement a comprehensive plan to improve its compliance with consumer financial protection laws, including the Military Lending Act.
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