WASHINGTON (11/21/13)--The Consumer Financial Protection Bureau announced Tuesday its first enforcement action against a payday lender.
The regulator said that it reached a settlement with Cash America International over robo-signing practices in debt collection lawsuits that affected approximately 14,000 people.
Cash America International, one of the largest payday lenders in the U.S., has agreed to terms that could see it paying up to $14 million in reimbursements. It will also pay a $5 million fine for the infringements and other misconduct, the CFPB reported.
The regulator said the offending loans were made between Jan. 1, 2008 and Oct. 1 2012, by Cash America International affiliates: Ohio Neighborhood Finance, Inc.; Cash America Pawn, Inc.; Cashland Financial Services, Inc.; Cash America Net of Ohio, LLC; Ohio Neighborhood Credit Solutions, Inc., and CNU of Ohio, LLC.
When CFPB announced earlier this month that it would accept complaints on payday lenders, the Credit Union National Association praised the move, but said it should focus on unregulated entities (News Now Nov. 7).
Credit Union National Associatin President/CEO BIll Cheney commended the CFPB on its action. He said, "Credit unions offer an alternative that serves their members' needs, without creating a dependency." He added, however, that CUNA remains concerned that the agency not over-regulate in this area, and inadvertently put credit union alternatives out of commission for those members who need this service.
Under federal rules, credit unions are allowed to make short-term, small-amount loans with an annual interest rate of no more than 18%, with some exceptions. Under National Credit Union Administration guidelines, federally chartered credit unions are allowed to charge no more than 10 percentage points above the established usury ceiling--currently, the statutory maximum is 28%.
Most credit unions that offer alternatives to conventional payday loans also limit fees, encourage members to open savings accounts and provide financial counseling.