Cash America to pay $5 million penalty related to loans
Fort Worth-based Cash America International, which in October disclosed that it was being investigated by the Consumer Financial Protection Bureau, said Wednesday it agreed to pay a $5 million civil penalty to settle charges it mishandled court documents and overcharged military personnel on loans. The CFPB said it's the young agency's first enforcement action against a maker of so-called payday loans -- short-term, high-rate advances to individuals.
Cash America in December 2012 said it would make refunds to about 14,000 Ohio customers that it took to court for nonpayment of their loans. It said at the time the voluntary action, whose cost it estimated at $13.4 million, came after it learned employees "did not prepare some court documents properly in many of its Ohio collections legal proceedings." Wednesday, the company said it had disclosed the actions to the CFPB during the agency's examination of Cash America.
The CFPB said Wednesday that the company has already paid out about $6 million in refunds and agreed to set aside $8 million to cover future claims. The agency also said Cash America made payday loans at illegal rates to "more than 300 active-duty servicemembers of dependents." The Military Lending Act caps the annual interest rate on loans to servicemembers at 36 percent, whereas payday loans typically carry effective rates several times that. CFPB said the $5 million penalty was based on those violations, as well as actions by Cash America's Enova Financial online lending unit that impeded the agency's investigation. Those actions included limiting information disclosed to investigators about marketing, deleting phone recordings and shredding documents.
-- Jim Fuquay