The Consumer Financial Protection Bureau has taken its first action against a payday lender since it began overseeing the industry in 2012. On Nov. 20, the CFPB announced a $14 million settlement with Cash America International, mostly relating to debt collection lawsuits in Ohio.
The company, which has nearly 1,000 locations and 860 in the U.S., issued a statement acknowledging the settlement “without admitting or denying any of the facts or conclusions made by the CFPB from its review.”
Cash America has agreed to issue refunds to 14,000 customers affected by robo-signing of court documents connected to debt collection lawsuits, and the company said it has already distributed $6.4 million of the $14 million, also paying a $5 million penalty for the alleged improper practices.
In its statement, Cash America also referenced a “limited number of loans extended to consumers who may have been members of the military at rates in excess of the annual percentage rate permitted by the Military Lending Act.”
Payday loans, also called cash advances, are marketed to consumers who are having trouble making ends meet between paychecks. They typically have terms of about two weeks, and people generally borrow less than $500. That bit of extra cash usually comes at a high price: Only 14% of borrowers can afford to pay the loan in full at the end of the term, according to data from the Pew Charitable Trusts, and high interest rates can trigger a cycle of debt. Of the 12 million Americans who use them each year, the typical borrower pays about $520 in finance charges for a $375 loan.
The CFPB started accepting consumer complaints about payday loans early in November.