In after-hours trading yesterday afternoon, Market Watch announced that shares of World Acceptance Corporation plunged 22% as the company disclosed that the staff of the Consumer Financial Protection Bureau (CFPB) is considering recommending that the agency take legal action against World. The company had previously disclosed that the CFPB was looking at its business practices.
According to World’s Securities and Exchange Commission (SEC) Form 8-K released yesterday, “On August 7, 2015, the Company received a letter from the CFPB’s Enforcement Office notifying the Company that, in accordance with the CFPB’s discretionary Notice and Opportunity to Respond and Advise (“NORA”) process, the staff of CFPB’s Enforcement Office is considering recommending that the CFPB take legal action against the Company (the “NORA Letter”). The NORA Letter states that the staff of the CFPB’s Enforcement Office expects to allege that the Company violated the Consumer Financial Protection Act of 2010, 12 U.S.C. §5536.”
World Acceptance Corporation is one of the largest consumer finance companies in the country. This action marks the CFPB’s first major foray into the installment lending industry.
We expect that any enforcement action against World will give insight into how the CFPB plans on using its enforcement power to regulate the consumer finance industry. The Sirote Consumer Finance Report will continue to monitor this story as it unfolds.