The CFPB announces first enforcement action against payday lender Cash America International, Inc.Read Time: 2 mins
On November 20, 2013, the Consumer Financial Protection Bureau (“CFPB”) announced its first enforcement action against a payday lender, Cash America International, Inc., stemming from its litigation conduct in Ohio. The CFPB found that Cash America violated “multiple . . . consumer financial protections laws.”
First, the CFPB found that Cash America engaged in unfair and deceptive conduct by engaging in “robo-signing.” The CFPB found that important documents, which “require careful review and a signature from a knowledgeable source,” were signed either by a person without knowledge, by a machine, or by a person who failed to follow appropriate procedures. The CFPB specifically noted that Cash America employees manually stamped attorney signature on legal pleadings, and that legal assistants notarized documents without following proper procedures. The CFPB estimated that from 2008 to 2012, approximately 14,000 Ohio consumers paid money as a result of debt collection litigation that relied on robo-signed documents.
Second, the CFPB found that Cash America violated the Military Lending Act by extending payday loans with a military APR greater than 36% to more than 300 active-duty members.
Third, the CFPB found that Cash America impeded the CFPB’s examination of Cash America by allowing thousands of records to be destroyed. Moreover, it found that one of Cash America’s subsidiaries instructed employees to limit the information they provided to the CFPB, deleted recorded phone calls to consumers, continued to shred documents after the CFPB told them not to, and withheld a report specifically related to robo-signing.
Before this order, Cash America had already voluntarily refunded $6 million to Ohio consumers subject to this unlawful litigation, who paid money to Cash America to settle claims or satisfy judgments. Cash America also voluntarily dismissed its pending collections lawsuits in Ohio without prejudice, and voluntarily forgave the judgments it had obtained in Ohio since January 1, 2008. The order requires Cash America to immediately deposit an additional $8 million into a segregated deposit account for the purpose of continuing to reimburse the 14,000 Ohio consumers affected by the unlawful litigation.
The CFPB also ordered Cash America to pay a $5 million fine directly to the CFPB, and to develop and implement a comprehensive plan to improve its compliance with consumer protection laws.
In addition to the CFPB’s enforcement action, Cash America is also involved in an Ohio lawsuit regarding whether it may make payday loans as a Mortgage Loan Act licensee, or whether it must be licensed under the more restrictive Short Term Loan Act. The matter is currently pending before the Ohio Supreme Court, with oral arguments scheduled for December 10, 2013. The case is titled Ohio Neighborhood Finance, Inc. v. Scott, and the docket can be found here.