The Consumer Financial Protection Bureau took its first enforcement action against a pay day lender, ordering Cash America International Inc. to issue up to $14 million in refunds to consumers and to pay a $5 million fine for destroying records prior to a visit by agency examiners.
The company robo-signed legal documents in debt collection lawsuits against 14,000 consumers in Ohio, manually stamping attorney signatures and improperly notarizing documents, the CFPB said. Also, the company allegedly charged military service members interest rates exceeding the 36 percent cap set by the Military Lending Act.
Based in Fort Worth, Texas, Cash America has hundreds of retail locations in more than 20 states as well as online operations. The publicly traded company did not immediately respond to a request for comment.
It was the consumer agency’s first action under the Military Lending Act, as well as the first time the agency has fined a company for failing to comply fully with its supervisory examination authority.
“As with most of our exams, we directed Cash America to preserve certain documents and call recordings until we conducted our review,” CFPB Director Richard Cordray said in a conference call with reporters. “But when our staff went onsite we learned that, despite this instruction, Cash America had not told company employees to preserve these important records, so they were destroyed. In addition, managers had actively coached employees about what to say to Bureau examiners.”
During the July 2012 examination, the CFPB said it discovered that Cash America’s debt collection subsidiary in Ohio, Cashland Financial Services, was robo-signing documents. Examiners also discovered that Enova Financial, Cash America’s online payday loan subsidiary in Chicago, had charged illegally high interest rates to more than 300 service members.
The company has already voluntarily paid back $6 million to military borrowers and people who were subject to robo-signing practices. The CFPB order requires Cash America to pay up to $8 million more in refunds, in addition to the $5 million fine.
A CFPB official said the misconduct “wasn’t systematic throughout the company,” and that the agency viewed the destruction of documents as a civil violation that “did not limit our ability to reach [our] findings.”