By: Kevin McCoy
November 20, 2013
Cash America International, a major owner of U.S. pawn shops and payday loan shops, has agreed pay $19 million in consumer refunds and fines for robo-signing documents used in debt collection, issuing improperly high loans to military members and destroying records sought by a federal regulator.
The Consumer Financial Protection Bureau imposed the penalties Wednesday under a consent order with the Fort Worth-based company. The penalties marked the agency's first enforcement action against a payday lender, one of the industries the regulator has examined since its 2010 creation under the Dodd-Frank financial reform act.
"If the bureau had not gone on site at Cash America, these problems might never have been uncovered," said CFPB Director Richard Cordray, who said the case highlighted the watchdog agency's mandate to oversee non-bank firms that affect millions of Americans "and make sure they're following the law."
Cash America CEO Daniel Feehan said the firm cooperated with examiners. "Now that we have completed the initial CFPB review process and entered into this settlement, we will continue to focus on serving our customers while working to develop additional compliance programs," he said.
According to the consent order, workers in Cash America's Ohio-based collections department improperly stamped their manager's signature on loan collection affidavits for nearly five years "without the manager's prior review of the affidavits or supporting documentation." An unidentified in-house collection attorney also directed workers to stamp the lawyer's name on Ohio court pleadings that had not been reviewed, the order said.
More than 14,000 Ohio consumers targeted in debt-collection lawsuits from 2008 to Jan. 2013 were affected, said Cordray. Cash America has already started repaying $6 million to the consumers, and will pay an additional $8 million in refunds, he said. The company also worked with the consumer watchdog to cancel improper Ohio debt-collection judgments.
Separately, investigators found that Cash America's online payday loan subsidiary in Chicago for nearly a year gave active-duty service members loans above the 36% annual interest rate maximum allowed by the Military Lending Act. More than 300 military members or their dependents received the loans.
Cash America has refunded $33,550 in loans and related fees to those customers, according to the order.
When notified in July 2012 that the regulator planned to examine its records, Cash America failed to preserve recorded phone calls and halt shredding of documents requested for the review. According to the order, company managers also told call-center workers "to de-emphasize the marketing and sales aspect" of their duties. They also instructed some to avoid using the word "sales" during interviews with examiners, and removed sales-focused material from office walls and cubicles.
The company has agreed to pay a $5 million fine for failing to preserve the requested records. During a conference call with reporters Wednesday, Steve Antonakes, the consumer watchdog's deputy director, said it was unclear whether the record destruction was part of a deliberate effort to impede the exam.
The consent order also requires Cash America to strengthen its legal compliance procedures.