On October 24, 2018, the Bureau of Consumer Financial Protection (“BCFP” or the “Bureau”) announced that it had reached a settlement with Tennessee-based small-dollar lender and check casher, Cash Express LLC, which agreed to resolve the Bureau’s claims by paying a $200,000 fine and approximately $32,000 in restitution to affected consumers. The consent order includes a finding that, among other allegations, Cash Express had engaged in “abusive” acts and practices in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), notwithstanding recent indications from Acting Director Mick Mulvaney that the “abusive” standard lacks clarity.
The Bureau’s findings included three acts and practices by Cash Express alleged to be in violation of the Dodd-Frank Act:
- (1) deceptively threatening in collection letters that the company would sue consumers if they failed to make payments on defaulted loans, even though the debts were too old to be enforceable in court;
- (2) misrepresenting that it might report negative credit information to consumer reporting agencies for late or missed payments, even though the company did not actually report this information; and
- (3) abusively withholding money from checks during check-cashing transactions to “set-off” outstanding amounts on the consumer’s prior loans with Cash Express, without disclosing this practice to the consumer during the transaction.
With respect to the “abusive” finding, the BCFP asserted that Cash Express took “unreasonable advantage of the consumers’ lack of understanding that [the company] would withhold a portion, or the entire amount, of the checks the consumers intended to cash” and therefore violated Sections 1031(d)(2)(A) and 1036(a)(1)(B) of the Dodd-Frank Act. This consent order comes just a week after Acting Director Mulvaney discussed the uncertainty arising from the agency’s past practice of regulation by enforcement at Mortgage Bankers Association conference, and specifically noted the lack of clarity around the definition of “abusive” under the Dodd-Frank Act. The order also follows the Bureau’s recent semiannual update of its rulemaking agenda in which it indicated the agency would consider whether to pursue a rulemaking or other action to more concretely define “abusiveness” under the Dodd-Frank Act. The settlement with Cash Express appears to indicate that the Bureau does not plan to entirely cease enforcement activities related to “abusive” acts and practices while it considers a potential rulemaking to define the “abusiveness” standard.