The CFPB has announced a settlement with short-term lender Main Street Personal Finance and its subsidiaries for engaging in unfair and deceptive acts and practices.
The Consumer Financial Protection Bureau has announced a settlement with Delaware incorporated and Tennessee-based Main Street Personal Finance, Inc. and its subsidiaries—ACAC, Inc., which conducts business under the name Approved Cash Advance, and Quik Lend, Inc. After reviewing the lending practices, the Bureau found that the short-term lender violated the Consumer Financial Protection Act (CFPA) and the Truth in Lending Act (TILA), by providing deceptive finance charge disclosures, and failing to refund overpayments on its loans, and violated the CFPA by engaging in unfair debt collection practices. Because the lenders operated as a common enterprise, each of them is jointly and severally liable for the acts or practices committed. Under the consent order the companies must pay approximately $3.5 million in consumer redress, which amount is suspended upon its payment of $2 million of that judgment, and $1 civil money penalty to the Bureau, and they are prohibited from engaging in this unlawful conduct in the future.
The lenders offer payday loans, title loans, and check cashing in retail centers in Alabama, Louisiana, Michigan, Mississippi, Oklahoma, South Carolina, Tennessee, and Virginia. The lenders are covered persons under the CFPA because they make, service, and collect upon consumer loans, and they are "creditors" under TILA and Regulation Z because they regularly extend credit for personal, family, or household purposes that is subject to a finance charge and is initially payable to them.
According to the consent order, the lenders violated the CFPA’s prohibition against engaging in deceptive acts or practices and TILA by concealing and understating the actual finance charges of its auto-title loans, for over 4,000 consumers. The lenders’ contracts and disclosures did not plainly indicate to consumers that the finance charge and total amount paid under the 10-month amortization schedule would be higher than those paid under the single-payment schedule. The lenders’ failure to disclose the finance charge that reflected the terms of the legal obligation between the parties violated TILA and Reg. Z, according to the consent order.
The Bureau determined that the lenders violated the CFPA’s prohibition against unfair acts or practices and TILA by retaining consumers’ overpayments on their loans for months and sometimes years instead of returning those funds to consumers. Consumers paid a total of over $3.5 million more than the finance charge listed in the lender’s loan disclosures. The consent order states that the lenders in many instances did not contact the consumers or issue refunds for extended periods, sometimes for over six months or for years in violation of the CFPA and TILA. TILA and Reg. Z require that, when a credit balance in excess of $1 is created on a credit account, the creditor must make a "good faith effort" to refund the consumer the credit balance remaining in the account for more than six months.
The Bureau also determined that the lenders’ collection calls to consumers’ workplaces and to credit references were violations of the CFPA related to collection calls. The Bureau found that the lenders engaged in unfair debt collection practices in violation of the CFPA when they made these calls after being asked to stop, and that the lenders improperly disclosed consumers’ debts to third parties or used tactics that risked such disclosure.
After taking into account the lender's lack of financial resources, the Bureau ordered it to pay a civil money penalty of one dollar to the Bureau.
Companies: ACAC, Inc.; Approved Cash Advance; Main Street Personal Finance, Inc.; Quik Lend, Inc.
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