Mulvaney Casts Doubt on Promises of Debt Collection Accountability with Favors to Payday Lenders
Says He “Sees Debt Collection as an Enforcement Priority” While Bending Over Backwards to Help Payday Lenders, An Industry Known for Aggressive and/or Illegal Debt Collection Practices
WASHINGTON, D.C. – Today, consumer watchdog organization Allied Progress called Consumer Financial Protection Bureau (CFPB) “Acting Director” Mick Mulvaney out for talking tough on debt collectors while going soft on the payday lending industry which has showered him with tens of thousands of dollars in campaign cash.
According to a Wall Street Journal report, Mulvaney said this week that “he sees debt collection as an enforcement priority… even as the bureau begins to ease its grips on other sectors such as payday lending.” This despite the fact that payday lenders are known for relying on aggressive and/or illegal debt collection practices. In fact, the CFPB has taken action against payday lenders over shady debt collection efforts several times.
The logic-defying tough talk flies in the face of Mulvaney’s record as “acting director” of the CFPB. In the months since his installation by President Trump in November, Mulvaney has dropped an investigation into a predatory lender that gave him thousands of dollars in campaign contributions, delayed the CFPB’s tough new rule protecting consumers from the worst practices of payday lenders, lied about his involvement in decision to drop a case against a predatory lender, and more.
“You can’t address the problems consumers encounter with debt collectors if you refuse to hold payday lenders accountable. Millions of Americans are trapped by these financial predators each year in difficult to escape cycles of debt – payday lenders are a driving force behind debt collection in this country. They routinely break the law and blur ethical lines in their collection practices,” said Karl Frisch, executive director of Allied Progress.
He continued, “Rather than doing favors for the payday lending industry that has showered him with tens of thousands of dollars in campaign cash, Mulvaney should fulfill the mission of the CFPB and protect consumers from payday predators that actively fuel the debt collection industry and its worst practices.”
PAYDAY LENDERS RELY ON AGGRESSIVE AND/OR ILLEGAL DEBT COLLECTION PRACTICES
- The FTC Has Gone After Payday Lenders for Their Collection Practices. The Federal Trade Commission has “filed many law enforcement actions against payday lenders for, among other things… employing unfair, deceptive, and abusive debt collection practices. The FTC has also filed recent actions against scammers that contact consumers in an attempt to collect fake ‘phantom’ payday loan debts that consumers do not owe.” [Payday Lending, Federal Trade Commission, accessed 03/22/18]
- Payday Lenders Have Used Threats and Harassing Phone Calls to Collect Debts. Former CFPB Director Richard Cordray said one payday lender used “‘threats, intimidation and harassing calls to bully payday borrowers into a cycle of debt.'” He described this as a “‘culture of coercion.'” [Jim Puzzanghera, “ACE Cash Express to pay $10 million over ‘cycle of debt’ allegations,” Los Angeles Times, 07/10/14]
ON AT LEAST FIVE OCCASIONS THE CFPB HAS TAKEN ACTION AGAINST PAYDAY LENDERS OVER THEIR DEBT COLLECTION PRACTICES
THE ILLEGAL TACTICS INCLUDED “ROBO-SIGINING,” AGGRESSIVE HOME AND WORK VISITS, AND ILLEGALLY DEBITING CUSTOMERS’ BANK ACCOUNTS
- The CFPB Went After ACE Cash Express for Using Illegal Debt Collection Practices to Get Borrowers to Take Out Additional Loans. In 2014, The Consumer Financial Protection Bureau reached a settlement with ACE Cash Express which required the Texas-based payday lender to pay a $5 million penalty and $5 million in refunds over charges the company used “illegal debt collection practices to pressure borrowers into taking out additional payday loans.” [Jerry Siebenmark, “ACE Cash Express agrees to $10 million settlement with federal agency,” The Wichita Eagle, 07/10/14]
- The CFPB Issued a Consent Order Against Cash American International for Using Deceiving Debt Collection Tactics Like Robo-Signing. In November 2013, the CFPB issued a consent order to Cash America International, “one of the country’s largest payday lenders,” for engaging in deceiving debt-collection tactics, such as “robo-signing.” The CFPB determined that the company told employees to “stamp a lawyer’s signature on court documents used to sue customers for past-due debts,” a practice which affected at least 14,397 Americans. Additionally, the CFPB claimed that Cash America charged “active-duty service members and their families more than 36 percent interest on payday loans,” a violation of the Military Lending Act. Cash America agreed to pay a “$5 million civil penalty,” to repay $14 million to customers, and to “develop better compliance-management systems.” [Administrative Proceeding No. 2013-CFPB-0008 (Cash America International, Inc.), filed 11/20/13; Danielle Douglas, “Payday lender Cash America fined over claims of robo-signing, gouging military members,” The Washington Post, 11/21/13]
- The CFPB Fined EZCorp Inc. for Aggressive Attempts to Collect Debts at a Borrower’s Home and Workplace. In 2015, the CFPB fined “payday and pawn lender EZCorp Inc.” $10.5 million for “alleged illegal debt collection tactics,” including aggressive attempts to collect payment at the borrower’s home and workplace and lying about consumers’ rights. [Jacob Passy, “CFPB Demands EZCorp Pay $10M for Debt Collection Tactics,” American Banker, 12/17/15]
- The CFPB Sued CashCall for Illegally Debiting Borrower Accounts for Loans that Were Void and Violating Federal Law. In December 2013, the CFPB sued CashCall and its subsidiaries for “engaging in ‘unfair, deceptive, and abusive practices,’ including illegally debiting borrower accounts for loans that were, in fact, void” and violating “‘federal law by seeking to collect on loans that were completely void or partially nullified.’” The lawsuit sought “a court order that would require CashCall to refund money that was unlawfully collected from borrowers, plus additional penalties, and an order requiring CashCall to follow all laws in collecting loans from consumers.” [CFPB v. CashCall, Inc. et. al., Case No. 1:13-cv-13167, filed 12/16/13; Ann Carrns, “Federal Consumer Agency Sues Over Online Loans,” The New York Times, 12/16/13; Stuart Pfeifer, “Regulators accuse Cash Call of improperly collecting from borrowers,” Los Angeles Times, 12/16/13]
- The CFPB Sued Think Finance, LLC for Deceiving Consumers into Repaying Loans that Were Not Legally Owed. The CFPB sued Think Finance, LLC for “‘deceiving consumers into repaying loans that were not legally owed.’” The CFPB alleged that Think Finance illegally collected “on loans that are void under state laws governing interest rate caps or the licensing of lenders.” Think Finance later filed for bankruptcy. [CFPB v. Think Finance, LLC, Case no. 4:17-cv-00127-BMM; JD Alois, “CFPB Guns for Think Finance. Files Suit Alleging Consumer Deception in Repaying Loans Not Legally Owned,” Crowdfund Insider, 11/16/17; “Montana Court Refuses to Shift Venue of ‘Related to’ CFPB Police Action to Texas Bankruptcy Court,” Squire Patton Boggs, 03/06/18]
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