Pretty big news coming from CFPB and Cash America today, $19 million in refunds and fines laid down on Cash America. $5 million of the $19 million is penalty and the remainder will be refunds of fees paid by consumers.

Cash America apparently violated some debt collection rules and also had some improper internal behavior where they were attempting to hide information from CFPB. I believe most of the activity occurred in Ohio.

This is the first major action by the CFPB and a number of papers across the United States are featuring the story. I would recommend that we all stay on top of the CFPB topic. I watch them out of the corner of my eye and know it could be a major concern in the future.

Here’s a link to the article on the front page of The Dallas Morning News: http://www.dallasnews.com/

Although we are all hopeful the proposed CFPB rule will unravel in the near future, the CFPB action against Moneytree is a good reminder that we can at any time be examined by the CFPB in the same way that the OCCC can show up at our stores at any time.

Specific to this particular action was collections and advertising.  The information on www.CFPB.gov stated that there were “deceptive online advertisements and collections letters.” And that “the company also made unauthorized electronic transfers from consumers’ bank accounts.”

CFPB has ordered the company to cease its illegal conduct, provide $255,000 in refunds to consumers, and pay a civil penalty of $250,000.

What did the CFPB say Moneytree did wrong?

§  “Used deceptive online ads: In early 2015, Moneytree ran advertisements online offering to cash consumers’ tax refund checks for “1.99.” The actual fee for the service was 1.99 percent of the amount of the check cashed, rather than $1.99, as the company’s advertisements implied. Consumers were required to visit one of Moneytree’s physical branches to take advantage of the advertisement’s offer, which appeared online tens of thousands of times.”

§  “Deceptively told consumers their vehicles could be repossessed: From late 2014 through early 2015, Moneytree mailed letters to hundreds of consumers indicating that their vehicles could be repossessed if they did not make past-due payments on their installment loans. But none of these consumers had loans secured by their vehicles, and Moneytree had no right or ability to repossess them.”

§  “Withdrew money from consumers’ accounts without authorization: Moneytree failed, in over 700 instances, to obtain pre-authorization from consumers for withdrawals from their bank accounts, in violation of federal law.”

What are the take-aways?

Advertising:  As an owner of your business ALWAYS read the final proof of all advertising and distribute the policy on a campaign in writing to your team, communicate the policy verbally as well so that emphasis can be made in areas where necessary.   Think critically about how a statement can be interpreted on your advertising materials, ask yourself “If a regulator who wants me out of business reviews this how else could this advertising copy be interpreted to be accurate or to be misleading?”

Collections:   I am not sure if this was an error or if it was intentional that Moneytree sent letters to debtors saying they were going to repossess their vehicles if they did not pay their unsecured loan off.  I am going to assume that this was an error I really have not met anyone in the last (5) years of consulting that would do that kind of thing intentionally.  As an owner of your business make sure to review and approve collections letters as they go out.  Collections (and in particular repossession) is a risk laden mine field on the regulatory front.  There are too many instances of fines occurring due to internal error in Collections not to make sure you keep an extra close eye on this crucial part of every business.

ACH or Debit Card authorizations: Everyone must get an ACH or debit authorization for every transaction.  Only debit the amount(s) due per the agreement and payment amounts must match what is on the payment schedule.  Most know this, but often times the employees get bogged down or too busy and these errors occur.  An automated e-sign process helps this as signature lines are less likely to get missed.  If you do not have the authorization signed, it could be deemed “illegal.”

Link to story: http://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-moneytree-deceptive-advertising-and-collection-practices/

This blog post was written by Michael Brown, President of CAB Consulting and the Texas Organization of Financial Service Centers.  He can be reached at 214-293-8676, or Michael@CreditAccessBusiness.com.