On October 24, 2018, the Consumer Financial Protection Bureau (“CFPB”) announced that it had entered into a Consent Order with a Tennessee-based small dollar lender, resolving allegations that the lender had committed deceptive acts and practices in violation of the Consumer Financial Protection Act (“CFPA”), 12 U.S.C. §§ 5531, 5536(a)(1)(B). The Consent Order states that between 2013 and 2016, the lender sent deceptive collection letters to thousands of borrowers threatening to take legal action with respect to debts that the lender was time-barred from enforcing. According to the CFPB, over 150 consumers responded to these letters with payment.
The CFPB also found that from 2013 through September 2015, the lender had violated the CFPA by misrepresenting to consumers in loan applications, privacy policy disclosures, collection letters, and loan agreements that it would report negative credit information to credit reporting agencies such as late payments or defaults, when in fact the lender was not furnishing any information to credit reporting agencies during that time.
Lastly, the CFPB found the lender committed abusive practices under the CFPA with respect to its check-cashing services. According to the CFPB, when consumers visited the lender’s stores to cash checks, if a consumer had a prior outstanding loan balance, the lender would keep some or all of the check’s proceeds to satisfy that debt. The lender’s employee training materials specifically instructed employees not to disclose this practice to consumers during check-cashing transactions and further instructed employees to physically keep the check out of the consumer’s reach until check-cashing transactions were complete.
The Consent Order requires the lender to pay $32,000 in restitution to consumers and a $200,000 civil penalty. It also bars the lender and its subsidiaries from deducting money from consumers’ checks unless at the time of the check-cashing transaction, the lender clearly and prominently discloses to the consumer the request for a debt payment and the consumer affirmatively consents to the debt payment in writing before the transaction is completed.