A payday lender has agreed to pay a $200,000 penalty and $32,000 in restitution to settle Consumer Financial Protection Bureau charges arising from the company’s methods of collecting unpaid loans. According to the Bureau, Cash Express, LLC, sent consumers dunning letters that misrepresented its collection methods and improperly withheld amounts needed to repay prior loans when it cashed subsequent checks for consumers. The company did not admit any violations of the law in agreeing to the settlement.
According to the consent order, Cash Express and an affiliate, First Cash Express, LLC, provide short-term, small-dollar loans and check cashing services in Alabama, Kentucky, Mississippi, and Tennessee, through more than 325 storefronts. Cash Express has been in operation since 1998.
Charged violations. The Bureau charged specifically that the two companies violated the Consumer Financial Protection Act in four ways:
- They mailed more than 19,000 letters demanding that debts be paid after the statutes of limitations on the debts had passed and, in most cases, they also threatened to sue.
- They threatened to file collection suits when, in fact, they almost never did so and had no intention to do so.
- They threatened in both loan applications and collection letters to provide negative information to credit reporting agencies when they did not intend to do so.
- They set off check cashing proceeds against loan payments that were due without disclosing the practice when the checks were presented.
Consent order obligations. In addition to making the required payments, the companies are obligated by the consent order to refrain from set-offs unless the consumer consents before the check is cashed. They also may not make misrepresentations about collection suits or credit reports.
The companies also must create a compliance plan and secure the Bureau’s approval. However, the order does not impose any ongoing monitoring requirement.
