By Nicole D. Prysby, J.D.
The Bureau announced a $1.3 million settlement with Cash Store, after claiming that the lender deceptively advertised loan specials, made excessive calls to consumers, and contacted third parties as a tactic to obtain payment.
On April 1, 2020, the Consumer Financial Protection Bureau announced its settlement with a short-term lender that allegedly engaged in unfair and deceptive acts in the course of marketing payday, auto title, and other consumer loans. Cottonwood Financial Ltd., which does business under the name Cash Store, had been charged with deceptively advertising specials for 50 percent off of loan fees, when it did not actually provide the discount. It also made excessive calls to consumers and contacted third parties—such as a consumer’s employer—as a tactic to obtain payments from the consumer, the CFPB asserted. Cash Store also allegedly failed to maintain adequate policies and procedures concerning the accuracy and integrity of the information it furnished to consumer reporting agencies and failed to provide the annual percentage rate to consumers when they inquired over the phone about the cost of their loans. The company will pay $1.3 million in penalties: $286,675 to over 1,200 borrowers and a civil money penalty of $1,100,000.
Short-term lender Cash Store operates 340 lending outlets in Idaho, Illinois, Michigan, New Mexico, Texas, Utah, and Wisconsin. The Bureau found that in the course of marketing, servicing, and collecting on high-interest payday, auto-title, and unsecured consumer-installment loans, Cash Store violated the Consumer Financial Protection Act (CFPA), Fair Credit Reporting Act (FCRA), and Truth in Lending Act (TILA).
Consent order. According to the Consent Order, Cash Store engaged in the unfair practices by: repeatedly calling consumers’ workplaces and references after being asked to stop; disclosing the delinquency of consumers’ debts to third parties or using tactics that risked such disclosure; and making excessive calls to consumers that aggravated, annoyed, and distressed those consumers. For example, Cash Store routinely called the consumers’ employers, the consumers’ other references, and other third parties as a tactic to obtain payments from the consumers. It also called some consumers 15-20 times or more per day.
Cash Store allegedly made deceptive representations in its television advertisements and telemarketing calls when promoting "50%-off" all of its loan fees when it did not in fact provide that discount. Cash Store allegedly violated the FCRA by failing to maintain adequate policies and procedures concerning the accuracy and integrity of the information it furnished to consumer reporting agencies, potentially affecting about 20,000 consumer accounts. Cash Store also allegedly violated TILA by failing to provide the annual percentage rate to consumers when they inquired over the phone about the cost of their loans.
Cash Store voluntarily entered into a Stipulation and Consent to the Issuance of a Consent Order. The consent order requires Cash Store to provide $286,675 in redress to over 1,200 borrowers whom Cash Store falsely promised 50 percent off all fees. It also requires Cash Store to pay a civil money penalty of $1,100,000 to the Bureau’s Civil Penalty Fund. The consent order prohibits Cash Store from certain collection practices and requires it to ensure that its employees respond accurately when asked about loan costs. Cash Store must also submit a compliance plan, institute education and training, and monitor compliance.
Companies: Cottonwood Financial Ltd., doing business as Cash Store
MainStory: TopStory CFPB EnforcementActions FairCreditReporting Loans TruthInLending UDAAP
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