By Ryan C. Wood
Time and time again our clients show us outrageous contracts from payday lenders. I have seen contracts with APRs from 200%-300% and even one contract that had an APR of over 1,600%. Our clients know the APRs are ridiculously high and yet there are no other options for them at the time. Some of our clients are living paycheck to paycheck and if something unexpected comes up such as a medical emergency or car repair they need short-term cash. The payday lenders know that and charge them outrageously for this help. If the borrowers are unable to pay back the loan the phone calls and collection activity begins. Some lenders follow the law, but a lot of them do not. We have clients calling us crying because debt collectors are threatening to throw them in jail for not being able to pay a payday loan. The Consumer Financial Protection Bureau, (Who?) is taking a steps to stop the payday lenders from taking advantage of consumers. The Consumer Financial Protection Bureau (CFPB) was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2011. This Act was passed in response to the greed and dishonest business practices of real estate agents, appraisers and mortgage companies in the financial crisis of 2007 and 2008.
On November 20, 2013, the CFPB in In re Cash America International, Inc. File No. 2013-CFPB-0008 signed an order in an administrative proceeding that found Cash America International Inc. violated several laws. Cash America has many subsidiaries and affiliates. One of them is Enova. Enova provides pay day loans to consumers under the name CashNetUSA. Another subsidiary and affiliate is Cashland Financial Services, Inc. (“Cashland”) The CFPB notified Cash America that CFPB would be conducting an examination of their company for a specific period (July 1, 2011, to June 30, 2012). CFPB informed Cash America to keep all records and they should not destroy any documents. When CFPB visited Cash America and Enova’s offices, CFPB found that Enova shredded documents even after CFPB’s letter specifically telling Cash America and Enova not to shred any documents. CFPB also found that Enova did not keep any records of their incoming or outgoing calls to consumers. CFPB also found that Cash America and Enova told their employees to de-emphasize the “sales” aspect of their jobs and turned off the auto-dialer that made automatic outbound marketing calls to consumers.
CFPB also found that Cashland’s collection activities were unfair and deceptive because the employees were manually stamping and notarizing documents and state court proceedings without the manager’s review of the documentation and did not follow the procedures required by law. This practice caused consumers to pay potentially incorrect amounts or had to spend their own money in court costs to defend themselves in court against the lawsuits. Some went to see bankruptcy lawyers because there was no way for them to repay the amounts listed on the lawsuits since they included the original debt plus interest and penalties. Cash America has refunded approximately $6.4 million to consumers that were affected by these frauds. The CFPB ordered Cash America to provide another $8 million to continue refunding consumers that have been affected by these unfair and dishonest practices.
Additionally, CFPB found that Cash America violated the Military Lending Act by charging active military members more than 36% to lend them money (as a bankruptcy attorney, I have seen most of these pay day loans contracts had APRs of 200% or higher).
CFPB ordered Cash America to cease and desist in all unfair and deceptive practices and illegal conduct. CFPB also ordered Cash America to set up rules and procedures in place that would comply with CFPB’s orders and to set up education and training courses for employees. Cash America was also fined $5 million in civil penalties for their practices.