The Consumer Financial Protection Bureau is starting to wade into the sewer of the U.S. financial services industry and peer under some rocks.
For five years, employees at Cash America, one of the country’s largest payday lenders, were told to stamp a lawyer’s signature on court documents used to sue customers for past-due debts.
This “robo-signing” helped the company improperly squeeze money out of at least 14,397 Americans, who are entitled to millions of dollars in restitution, the Consumer Financial Protection Bureau said Wednesday.
Remember
robo-signing? Ah, like me, you needed a
refresher:
"Robo-signing" is a term used by consumer advocates to describe the robotic process of the mass production of false and forged execution of mortgage assignments, satisfactions, affidavits, and other legal documents related to mortgage foreclosures and legal matters being created by persons without knowledge of the facts being attested to. It also includes accusations of notary fraud wherein the notaries pre- and/or post-notarize the affidavits and signatures of so-called robo-signers.
In a
press release, the CFPB said that the company hired legal assistants to rubber-stamp attorneys' names on documents such as affidavits, pleadings, and other account evidence even though no attorney had ever reviewed them.
The prey of choice for this pack of sharks? Active-duty service members.
The bureau also discovered instances of Cash America charging active-duty service members and their families more than 36 percent interest on payday loans in violation of the Military Lending Act, according to the enforcement order.
"Payday loans" typically advance money to borrowers in anticipation of a paycheck to arrive in the near future. Service members are an easy target, since their pay comes regularly from the government. So for the privilege of advancing that check Uncle Sam will send you for standing a post under enemy fire in the Korengal valley, this nice company back home was happy to charge more than the legally permissible (but already usurious) 36% interest. The exact interest rate charged to service members is left to our imagination. If you were late with your payment they were also happy to falsify a lawyer's signature on the summons served on your wife or parents back home.
In a settlement reached with the CPFB, Cash America agreed to pay $5 million in civil fines, but more importantly, $14 million in refunds to affected borrowers. Additionally they were compelled to notify credit bureaus of improper "black marks" on consumers' credit reports caused by their actions, and ordered to improve their compliance management systems. Admittedly this seems to be a paltry sum for a 1.8 Billion dollar publicly-owned company, but the payment is significant in that it marks the first enforcement by the CFPB as part of a broader crackdown on these industries by federal and state officials. Essentially this action marks a warning shot across the bow of the entire industry.
The crass venality of this company became apparent during the investigation:
Problems at Cash America came to light when the bureau conducted its first exam of the company in 2012. Before the visit, examiners told the company to retain documents and call recordings for review. But bureau agents learned that employees were instructed to shred files and erase calls. Employees confessed that managers had also coached them on what to say to examiners, according to the compliant.
And in addition to
being scumbags (the
descriptive term of Senator Jay Rockefeller, D-WVA), they even
moonlight as scumbags:
In addition to payday lending, Cash America is a major pawnshop chain, check-cashing business and installment lender.
It must give our troops a warm feeling to know what they're fighting for back home: the chance to be ripped off and then harassed by a predatory lender.
The growing prevalence of payday lending, especially in the wake of the financial crisis, has alarmed lawmakers and advocacy groups. Payday loans carry high interest rates and balloon payments that can trap Americans in a cycle of debt, critics say. Industry groups argue that payday lending serves a need that is not being met by traditional banks.
The industry has been loosely regulated by a patchwork of state laws until the 2010 Dodd-Frank financial reform law gave the CFPB enforcement and examination power.
The
New York Times conducted an investigation that found users of such services often discover themselves trapped in a spiral of ever-increasing debt. The average "payday" loan requires repayment of over $400 in two weeks. The average borrower cannot afford that (a fact well-known to the industry), resulting in constant rollover of these types of loans.
The CPFB was initially implemented and led by now-Senator Elizabeth Warren and is now directed by Richard Cordray. Warren is widely credited for inspiring the actual creation of the organization. Republicans did everything they could to prevent it from ever existing, opposing the Dodd-Frank legislation that established it and trying to dilute its independence once its existence was an unavoidable fact of law. Republicans also obstructed Cordray's appointment, refusing to confirm him when he was first nominated to the post. This prompted President Obama to appoint him during the Senate recess. Ultimately Cordray was confirmed as director by a 66-34 vote.