CFPB settles with short-term lenders for $2 million
On June 2, the CFPB announced a settlement with a payday and auto title loan lender and its subsidiaries (collectively, “lender”) resolving allegations that the lender violated the Consumer Financial Protection Act (CFPA) and TILA. Specifically, the Bureau asserts that the lender—which is based in Cleveland, Tennessee and operates 156 stores in eight states—violated the CFPA and TILA by (i) disclosing finance charges that were substantially lower than what the consumer would actually incur if repaid according to the amortization schedules; (ii) delayed refunds of consumer credit balances for months; (iii) made repeated debt collection calls to third-parties, including workplaces after being told to stop; and (iv) improperly disclosed, or risked disclosure, of consumer debt information to third parties. The Bureau alleges that the lender received over $3.5 million in finance charges that exceeded the amount stated in required TILA disclosures.
The consent order requires the lender to pay $2 million of the $3.5 million in consumer redress and $1 civil money penalty, based on a demonstrated inability to pay. The consent order also prohibits the lender from misrepresenting finance charges or engaging in unlawful collection practices and requires certain compliance and reporting measures to be undertaken.