As previously mentioned in this blog, the Consumer Financial Protection Bureau (CFPB) recently announced that it would begin fielding complaints about payday lenders. On November 20, 2013, the CFPB announced its first enforcement action against a payday lender. The CFPB ordered Fort Worth, Texas-based Cash America International, Inc. to refund consumers for robo-signing court documents in debt collection lawsuits.
Cash America, one of the country’s largest payday lenders, will reportedly pay up to $14 million in refunds to consumers as part of a consent order. The CFPB also fined Cash America $5 million for these and other violations, and for allegedly destroying records in advance of the Bureau’s examination. According to the order, Cash America must develop better compliance-management systems to safeguard against future compliance violations.
CFPB examiners reportedly learned that Cash America’s debt-collection subsidiary in Ohio, Cashland Financial Services, had been rapidly signing off on legal documents to obtain judgments against customers. Specifically, for five years, Cash America employees were told by the company’s in-house collection attorney to stamp a lawyer’s signature on court documents used to sue customers for past-due debts. The CFPB also found that Cash America violated the Military Lending Act by illegally overcharging service members and their families more than 36 percent interest on payday loans. Another subsidiary of Cash America, Enova Financial, reportedly destroyed some documents and other items, such as recordings of phone calls, before examiners could review them and coached some employees on how to answer questions.
Cash America, for its part, released a statement saying that now that it had entered into this settlement, it would continue to focus on serving its customers while working to develop additional compliance programs. This action by the CFPB suggests its intent to aggressively police payday lenders.