The Consumer Financial Protection Bureau has accused Cash America International of charging troops and family members interest rates above the 36 percent maximum annual percentage rate allowed by law.
It is the bureau’s first federal enforcement action against a payday lender for allegedly violating the Military Lending Act of 2006.
All the military-related allegations involve online loans, a CFPB spokesman said. A Cash America subsidiary, Enova International Inc., offers online loans in 32 states under the name CashNetUSA.
Enova has refunded $33,550 in fees to troops and family members because of 362 payday loans, an average refund of about $93 per loan, according to the consent order.
As part of the same consent order but for an alleged violation separate from the Military Lending Act allegations, Cash America agreed to pay $8 million in refunds to eligible Ohio residents in addition to $6.4 million in refunds already paid. The company also agreed to pay a $5 million fine.
Cash America’s debt collection subsidiary in Ohio, Cashland Financial Services Inc., allegedly prepared, executed and notarized documents filed in its collections litigations without complying with state and court-required signature rules, the CFPB said.
An estimated 14,000 Ohio consumers paid money as a result of debt collections that may have involved improper court filings.
There may be some overlap between this group and the military borrowers, but there has been no analysis of how many of the borrowers eligible for the $8 million are service members or dependents.
Consumers who were subject to debt collection lawsuits in Ohio from 2008 through January 2013 are eligible. For more information, visit www.consumerfinance.gov/blog/our-first-enforcement-action-against-a-payday-lender.
“This action brings justice to the Cash America customers who were affected by illegal robo-signing, and shows we will vigilantly protect the consumer rights that service members have earned,” said CFPB Director Richard Cordray.
Cash America International neither admits nor denies any of the CFPB’s facts or conclusions, according to a statement from Daniel Feehan, the company’s president, who said only that “we fully cooperated with the CFPB.”
The consent order said the alleged violations of the Military Lending Act were partly due to “systems errors.” Feehan said his company “has corrected the systems errors that permitted these loans to be made.”
Since the Military Lending Act was enacted, consumer advocates say it has had some effect on curtailing loans with exorbitant interest rates. But until January, when Congress amended the law, federal regulators, including the CFPB, had no enforcement authority.
Online lending remains an issue, with the most egregious offenders located offshore or outside the U.S. to avoid coverage under the law, according to past Defense Department testimony to Congress.