For many years, we have warned that payday loans are a defective product designed to trap consumers in debt. Today's Consumer Financial Protection Bureau (CFPB) enforcement action against Cash America—one of the largest payday lenders in the U.S.—shows multiple harms to consumers that go beyond the inherent abuses of the product.
A remarkable array of activities led up to the CFPB action.
First, Cash America restructured its loans to avoid Ohio's voter-approved 28% APR cap---a practice that is currently under review by the Ohio State Supreme Court.
Then the CFPB investigation found that Cash America engaged in a series of illegal shortcuts to collect on these loans, which were already legally questionable.
The firm also ignored the Military Lending Act, a law passed by Congress to protect military personnel from triple-digit payday loans. Cash America actually manipulated affidavits that effectively waived protections specifically designed to protect our men and women in uniform and their families.
To top it all off, Cash America then actively attempted to impede the CFPB's investigation and cover up its offenses by, among other actions, shredding documents and deleting recorded telephone conversations.
We applaud the CFPB for conducting a thorough investigation involving a business model dependent on triple digit interest and long-term debt. We also echo Director Cordray's statement that this action should stand as a clear message to any company under the CFPB's jurisdiction that engages in these illegal activities.
For more information, contact Ellen Schloemer at 919-539-9092 or ellen.schloemer@responsiblelending.org