CFPB Takes Action Against Payday Lender Cash America For Robo-Signing

20131120-FG20001120CFPB-CWashington, D.C. – The Consumer Financial Protection Bureau (CFPB) today took its first enforcement action against a payday lender by ordering Cash America International‚ Inc. to refund consumers for robo-signing court documents in debt collection lawsuits. The CFPB also found that Cash America – one of the largest short-term, small-dollar lenders in the country – violated the Military Lending Act by illegally overcharging servicemembers and their families. Cash America will pay up to $14 million in refunds to consumers and it will pay a $5 million fine for these violations and for destroying records in advance of the Bureau’s examination.

“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 servicemembers have earned,” said CFPB Director Richard Cordray. “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.”

Payday loans are often described as a way for consumers to bridge a cash flow shortage between paychecks or the receipt of other income. They can offer quick access to credit, especially for consumers who may not qualify for other credit. Many payday loans are for small-dollar amounts that must be repaid in full in a short period of time.

Cash America is a publicly traded financial services company headquartered in Fort Worth, Texas that provides consumer financial products and services, including payday loans, lines of credit, installment loans, and pawn loans. With hundreds of retail locations across more than 20 states, it is one of the largest payday lending companies in the United States. Cash America’s Chicago-based subsidiary, Enova, offers online loans in 32 states under the brand name CashNetUSA.

Today’s action is the Bureau’s first public enforcement action against a payday lender; its first public action under the Military Lending Act; and the first public action for a company’s failure to comply fully with the CFPB’s supervisory examination authority.

Violations

After a routine CFPB examination of Cash America’s operations, the CFPB found multiple violations of consumer financial protection laws, including:

Robo-signing: Robo-signing generally refers to a practice where important documents that require careful review and a signature from a knowledgeable individual are instead signed by someone else, a machine, or by someone who does not follow appropriate procedures. Robo-signing can result in inaccurate court affidavits and pleadings, which may cause consumers to pay false debts, incorrect debts, or legal costs and court fees. For nearly five years, Cash America’s debt collection subsidiary in Ohio, Cashland Financial Services, Inc., had been preparing, executing, and notarizing documents filed in its Ohio collections litigations without complying with state and court-required signature rules. The CFPB estimates that about 14,000 consumers paid money as a result of debt collection litigation which may have involved reliance on improper court filings. Specifically:

  • Employees manually stamped attorney signatures on legal pleadings, and department manager signatures on balance-due and military-status affidavits, without prior review; and
  • Legal assistants notarized documents without following proper procedures.
  • Illegally overcharged servicemembers: Cash America violated the Military Lending Act, which restricts the rate on certain types of loans given to servicemembers to 36 percent. Cash America extended payday loans exceeding that rate to more than 300 active-duty servicemembers or dependents.

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