Payday lender Cash America fined over allegations of robot signing, military scams

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Consumer Financial Protection Bureau (CFPB) director Richard Cordray announced the fine on CashAmerica on Wednesday. (Jacquelyn Martin / AP)

For five years, employees of Cash America, one of the nation’s largest payday lenders, have been urged to put an attorney’s signature on court documents used to sue clients for overdue debts.

The “robotic signature” helped the company improperly extract money from at least 14,397 Americans, who are entitled to millions of dollars in compensation, the Consumer Financial Protection Bureau said Wednesday.

The government watchdog said it has reached a $ 19 million settlement with Cash America over these and other abuses – its first with a short-term, low-cost lender.

The bureau also discovered instances where Cash America was charging active duty members and their families more than 36% interest on payday loans in violation of the Military Loans Act, according to the enforcement order.

The Fort Worth-based company has to pay up to $ 14 million to borrowers who were the subject of debt collection lawsuits in Ohio from 2008 to January 2013. Cash America, a publicly traded company of 1, $ 8 billion, repaid about $ 6 million to military borrowers and robo-signature victims.

In addition, he stopped attempting to collect debts that the CFPB identified as problematic and alerted credit bureaus to the erroneous black mark on borrower reports.

Cash America must also pay a civil fine of $ 5 million and develop better compliance management systems, according to the order.

“This action should send several clear messages: First, robotic signing practices are illegal wherever they occur, and they must stop, period,” CFPB director Richard Cordray said on a conference call. with journalists. “Second, violations of the Military Loans Act harm our military and will be vigorously monitored. Third, the office will detect and punish entities that withhold, destroy or hide information relevant to our examinations. ”

Problems at Cash America emerged when the office conducted its first review of the company in 2012. Prior to the visit, the examiners asked the company to keep documents and call records for review. But officers at the office learned that employees were instructed to shred files and delete calls. Employees confessed that managers also coached them on what to say to examiners, according to the conformer.

Despite Cash America’s evasive maneuvers, according to the complaint, examiners uncovered a series of troubling findings. They learned that the company’s debt collection subsidiary in Ohio, Cashland Financial Services, quickly signed legal documents to obtain judgments against clients – a widely documented practice in foreclosure cases.

At another Cash America subsidiary, Enova Financial, CFPB officials discovered that employees were overcharging members of the military.

Cash America said it had neither admitted nor denied the wrongdoing as part of the settlement and had fully cooperated with the CFPB investigation.

“Now that we have completed the initial CFPB review process and reached this settlement, we will continue to focus on serving our clients while working to develop additional compliance programs as required by the CFPB.” Daniel R. Feehan, the company’s chief executive, said in a statement. In addition to payday loans, Cash America is a leading chain of pawn shops, check cashing business, and installment lender.

Wednesday’s order against Cash America is part of a broader industry crackdown. State officials have stepped up efforts to prosecute lenders who violate interest rate caps, while federal prosecutors have opened investigations into similar violations.

The growing prevalence of payday loans, especially in the wake of the financial crisis, has alarmed lawmakers and advocacy groups. Payday loans carry high interest rates and lump sum payments that can trap Americans in a cycle of debt, critics say. Industry groups argue that payday loans meet a need that is not met by traditional banks.

The industry was loosely regulated by a patchwork of state laws until the 2010 Dodd-Frank Financial Reform Act gave the CFPB enforcement and review power. The agency is generally expected to write rules to govern the industry, but on Wednesday it refused to provide a deadline.

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