"Consumer Protection Agency Scores First Victory Against Payday Lenders"
A national payday lender will pay $19 million to settle various violations, including charging illegal interest rates to members of the armed forces, the Consumer Financial Protection Bureau (CFPB) announced Wednesday. It is the agency’s first enforcement penalty against a payday loan firm.
Fort Worth-based Cash America will pay $14 million to over 14,000 customers in Ohio who it hounded using improper legal documents as well as a $5 million fine. The company has already repaid $6 million of that total voluntarily, the CFPB reported. Cash America will also drop pending collections efforts relating to the Ohio cases.
Though the settlement does not include any admission of guilt, the CFPB says its investigation turned up evidence that the company instructed employees to stamp attorney signatures on various pieces of legal paperwork used to support collections lawsuits, and that in 300 cases the company charged interest rates higher than 36 percent to active-duty military personnel or their families in violation of the Military Lending Act. The agency also said that a Cash America subsidiary started shredding documents and deleting phone records when CFPB investigators came calling.
The company is one of the largest players in an industry that sucks $3 billion out of poor communities each year by charging stratospheric interest rates to about 12 million desperate customers annually.
The settlement is the latest example of the consumer agency flexing the muscles given to it under the 2010 Dodd-Frank Wall Street reform package. The CFPB has cracked down on debt collectors and given borrowers advice on fighting aggressive collection efforts, tackled the student loan crisis, and gathered evidence of systematic abuse in the mortgage business, among other achievements.
The agency’s robust approach to abusive practices by the financial industry has drawn heat from industry supporters in Congress. Republicans have wanted to dismantle the agency since its creation, and famously blocked now-Senator Elizabeth Warren (D-MA) from heading the agency that is her brainchild. Republicans renewed those efforts to undermine the agency’s independence and efficacy this week in the House Financial Services Committee, labeling the CFPB a “rogue” agency and reintroducing legislation to replace its director with a bipartisan commission, subject its budget decisions to congressional approval, and give other, older regulatory bodies the power to veto new rules from the upstart consumer watchdog. The changes conservatives demand would weaken the agency by curbing its independence and power.