Payday lender fined by Consumer Financial Protection Bureau
WASHINGTON — In its first enforcement action against a payday lender, the Consumer Financial Protection Bureau has fined Cash America International $5 million and ordered $14 million in refunds for overcharging customers, robo-signing documents in debt collection lawsuits and impeding an investigation.
Almost all the refunds go to consumers in Ohio, where lawyers for a subsidiary, Cashland Financial Services Inc., signed documents without reviewing them in violation of state and court rules, the bureau said Wednesday.
Created by the 2010 financial reform law, the bureau started overseeing payday lenders in 2012. Wednesday’s action marked the first federal oversight for an industry that has expanded in recent years as consumers struggled with the down economy.
Cash America, of Fort Worth, is one of the nation’s largest payday lenders, making short-term loans from about 1,000 storefront locations and online. The company said it fully cooperated with the bureau and did not admit to or deny the allegations.
The bureau has the authority to send examiners into payday lending companies and other non-bank financial firms to review their operations for violations.
The $5-million fine was levied against Cash America for violating laws regarding robo-signing and loans to military service members and for impeding a bureau investigation.
Another subsidiary, Enova, of Chicago, destroyed some documents and other items, such as recordings of phone calls, before examiners arrived to investigate its practices and coached some employees about how to answer questions, bureau officials said.
Enova makes online loans in 32 states under the name CashNet USA.
“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 service members have earned,” said Richard Cordray, the director of the bureau, also known as CFPB.
“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,” he said.
Cash America began voluntarily refunding money to Ohio borrowers involved in debt-collection lawsuits after the bureau began an investigation in January, officials said. The company has paid $6 million and agreed in a consent order to refund an additional $8 million for customers who were subject to the suits from 2008 through January.
Bureau officials said examiners at Enova, the Chicago unit, discovered that the company had overcharged military service members for short-term loans.
Examiners found that 362 loans violated a federal law restricting the interest rate that could be charged to service members on certain loans to a 36% annual rate, bureau officials said. Refunds in those cases total about $35,000, the bureau said.
