Kansas City payday lender must pay restitution and penalty
The director of a federal consumer watchdog has found that a Mission Hills businessman-led payday loan transaction violated the law and ordered that he pay $ 38.5 million in restitution.
Kathleen Kraninger, director of the Consumer Financial Protection Bureau, ruled this month that Integrity Advance should also pay a civil fine of $ 7.5 million and that the lender’s founder, Jim Carnes, pay a civil fine of $ 5 million.
Barring an appeal, Kraninger’s decision ends a long-standing CFPB case over Integrity Advance, which the agency accused of cheating on its borrowers. A lawyer for Carnes could not immediately be reached for comment.
The order marks another sanction, and the second in January, for Kansas City-area payday lenders.
Last week, Del Kimball, also of Mission Hills, dropped the charge and pleaded guilty to a charge of bankruptcy fraud that was related to its payday lending business.
Over the past four years, various agencies ranging from the Federal Trade Commission, the FBI, and the CFPB have targeted a bunch of Kansas City payday lenders because their loans were either deceptive, charged too much interest, took money. money in the accounts of people who had not authorized loans or operated through shell companies on Native American reservations.
The CFPB, an agency born in the aftermath of the 2008 economic crisis to protect consumers from financial scams, filed its first complaint against Integrity Advance in 2015.
Integrity Advance offered payday loans – so called because they are supposed to withhold borrowers until their next paycheck – for amounts between $ 100 and $ 1,000. Borrowers gave Integrity Advance electronic access to their bank accounts, allowing the company to put money in and withdraw money.
If borrowers did not repay their loan in full before their next paycheck, the loans would automatically renew and incur new finance charges. The CFPB felt that loan disclosures tricked borrowers into believing that loans would be paid off in one installment when they tended to put borrowers on track to renew their loans multiple times.
Federal law requires that lenders explain the loan terms clearly and without deception to borrowers so that they know how much it will cost to repay the loan.
The CFPB also said that when borrowers revoke Integrity Advance’s access to their bank accounts, the lender will create what are known as “remote-created checks” to withdraw funds from the accounts.
The CFPB director’s order of $ 38.5 million in restitution is down significantly from an administrative judge’s recommendation that Integrity Advance and Carnes pay $ 132.5 million. But the director adopted the judge’s suggestion of $ 7.5 million and $ 5 million civil penalties for Integrity Advance and Carnes, respectively.