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From Banking and Finance Law Daily, February 5, 2019

Payday lender settles CFPB charges of multiple consumer law violations

By Richard A. Roth, J.D.

A payday lender that operates in seven southern and central states has agreed to pay a $100,000 civil penalty to settle CFPB charges that it violated the Consumer Financial Protection Act, the Truth in Lending Act, and the Gramm-Leach-Bliley Act privacy protections.

Payday lender CMM, LLC, and affiliates in seven states have agreed to settle Consumer Financial Protection Bureau charges that they engaged in unfair acts or practices, did not properly disclose annual percentage rates, and failed to give consumers required initial privacy notices. Under the consent order, the companies jointly agreed to pay a $100,000 civil penalty, although they have not admitted that any violations of federal laws or regulations occurred.

CMM used subsidiaries in Alabama, Florida, Indiana, Kentucky, Louisiana, Mississippi, and Tennessee to operate about 45 payday lending business under the name Cash Tyme, the CFPB says. The consent order covers the period from Jan. 1, 2014, through Feb. 1, 2019.

UDAAP. The majority of the Bureau’s charges allege violations of the Consumer Financial Protection Act UDAAP provisions. The Bureau says that Cash Tyme:

  • failed to prevent or repay overcharges imposed on borrowers, including those resulting from unauthorized draws on borrowers’ bank accounts;
  • required loan applicants to provide contact information for their employers, supervisors, and four personal contacts, and then repeatedly called those individuals to seek payments if a borrower became delinquent;
  • disclosed the borrower’s financial information during those calls and sought to have the third party make payments or exert pressure on the borrower;
  • did not keep a do-not-call list;
  • used information about personal contacts for marketing purposes without disclosing that they would do so; and
  • advertised check-cashing and telephone reconnection services they had stopped providing.

Privacy notices. The GLB Act and Reg. P—Privacy of Consumer Financial Information (12 CFR Part 1016) required the companies to give borrowers specified notices of company information privacy policy no later than when a customer relationship was established, according to the CFPB. That relationship ended each time a borrower paid off his outstanding loans, and a new loan would create a new relationship. However, the companies only provided the required privacy notice when the first loan was extended, the Bureau claims.

TILA. The payday loans extended by the companies constituted closed-end credit under TILA and Reg. Z—Truth in Lending (12 CFR Part 1026), the Bureau alleges. As a result, before the companies extended a loan, they were required to disclose an annual percentage rate that was within 1/8th of 1 percent of the actual rate.

However, the companies failed to include in the APR a $1 fee that, under Kentucky law, was considered a finance charge that should have been included in the APR, the CFPB says. This resulted in a disclosed APR that was too low and in inaccurate APR disclosures in advertisements.

The companies also rounded off APRs in their advertisements and in-store displays in a way that made the advertised rate inaccurate, and they failed to disclose the term of repayment as required by Reg. Z.

Consent order. In addition to imposing the civil penalty, the consent order requires the company to cease any misrepresentations and stop making improper telephone calls to borrowers’ personal contacts. Information on personal contacts may not be transferred to third parties. Also, the companies must implement a process to prevent and, if necessary correct, any overcharges or unauthorized charges.

Required regulatory disclosures also must be made going forward.

The companies must provide a compliance program for approval by the CFPB’s regional director. However, while the company must comply with any ongoing monitoring by the Bureau, no independent compliance monitor is required.

Companies: Cash Tyme; CMM LLC

MainStory: TopStory AlabamaNews CFPB ConsumerCredit EnforcementActions FloridaNews IndianaNews KentuckyNews Loans LouisianaNews MississippiNews Privacy TennesseeNews TruthInLending UDAAP

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