ACI’s 27th National Conference on Consumer Finance Class Actions & Litigation

January 24 – 25, 2017

Payday Lending and Auto Enforcement Actions

Christy Ames

Tweeting about this conference? #ACICFCA Payday Lending

• What is a Payday Loan? • Short-term loan • Often for $500 or less • Typically due on a consumer’s next payday • What is the CFPB concerned about? • The creation of debt traps for consumers • Repeat short term borrowing • Banking penalty fees from repeat attempts to debit payments • Default • account closure for insufficient funds • Proposed Rule • Public comment ended Oct. 7 • Final rule not yet announced

#ACICFCA CFPB – PAYDAY – ALL AMERICAN CHECK CASHING, INC.

All American Check Cashing, Inc.- Check cashing and payday loans; 50 stores Mid-State Finance, Inc. – Check cashing and payday loans; 1 store Michael Grey – President and owner of both

Allegations: • Refuse to tell consumers how much they will be charged • Trap consumers who change their minds • Promise a better deal but charge higher fees • All American did not notify consumers who overpaid on a loan

Action: • Complaint filed May 11, 2016 in Southern District of • Four week bench trial scheduled in October 2017 • Seeking end to unlawful practices, redress for customers and monetary penalties

#ACICFCA CFPB – PAYDAY LOANS- Flurish, Inc., d/b/a LendUp Flurish, Inc., d/b/a LendUp - online lending company offering single payment loans or installment loans in 24 states

Allegations: • Misled consumers about graduating to lower-priced loans • Hid the true cost of • Reversed pricing without consumer knowledge • Understated the annual percentage rate • Failed to report credit information

Consent Order – September 27, 2016 • $1.83 million in redress to victims • $1.8 million civil penalty • End deceptive loan practices • End unlawful advertisements • Ensure accuracy of pricing #ACICFCA CFPB – PAYDAY LOANS - B&B Pawnbrokers, Inc.

B&B Pawnbrokers, Inc. - Originates pawn and auto title loans in

Allegations: • UDAAP - Misled its customers about the cost of its loans in more than 2,400 contracts • TILA - Unlawfully disclosed a misleadingly low APR

Actions: • CFPB filed complaint on Nov. 3, 2016 in Eastern District of Virginia (16-CV-887) • Seeking injunction, redress for customers and monetary penalties • Worked with Virginia who also filed complaint for violations of consumer protection act

#ACICFCA CFPB – PAYDAY LOANS - Moneytree, Inc.

Moneytree, Inc. - company that offers payday loans and check cashing services

Allegations – UDAAP • Did not correct weaknesses identified in exams • Used deceptive online ads • Deceptively told consumers their vehicles could be repossessed • Withdrew money from consumers’ accounts without authorization

Consent Order – December 16, 2016 • $55,000 in redress to victims • $250,000 civil penalty • Cease its illegal practices

#ACICFCA FTC -PAYDAY LOANS- SCOTT TUCKER, AMG Capital Management LLC, Level 5 Motorsports LLC, Black Creek Capital Corporation and Broadmoor Capital Partners

Allegations – Violated Section 5 of the FTC Act • Falsely claimed defendants would charge one time fee • Instead charged borrowers fee with each consumer withdrawal Action • In October 2016, District of granted MSJ ordering defendants to pay $1.3 billion - the difference between what consumers actually paid on the loans and what they were told they would have to pay • Defendants banned from consumer lending and other actions • The FTC reached a partial settlement with some of the other defendants and reached settlements with others in amounts of $21 million and $4.4 million

#ACICFCA FTC - PAYDAY LOANS - Joel Tucker, SQ Capital LLC; JT Holdings, Inc. and HPD LLC

Allegations – Violated Section 5 of FTC Act • Sold portfolios of fake payday loans to debt collectors • Debt collectors persuaded people the debts were real and convinced them to pay the fake debts • Defendants did not have the authority to sell debts of the lenders they named

ACTION • On December 16, 2016, FTC filed complaint in District of Kansas (16- 02816) • Court granted the FTC’s request for a preliminary injunction that prohibits the defendants from selling fake debt • Seeking permanent injunction and redress

#ACICFCA CFPB – PAYDAY LOANS- FOUR VIRGINIA PAWN BROKERS Spotsylvania Gold & Pawn, Inc. Fredericksburg Pawn, Inc. Pawn U.S.A., Inc. A to Z Pawn, Inc.

Allegations – UDAAP and TILA • Deceived consumers about the actual annual costs of their loans • Understated APRs

Actions: • CFPB filed 4 complaints on Dec. 19, 2016 in Eastern District of Virginia (16-CV- 988, 16-CV-987, 16-CV-1566, 16-CV-1566,16-CV-1567) • Seeking injunction, redress for customers and monetary penalties • Similar to B&B Pawnbrokers action

#ACICFCA CFPB – AUTO - CarHop and Universal Acceptance Corporation

CarHop - One of the country’s biggest “buy-here, pay-here” auto dealers headquartered in Minnesota with 50 locations in 15 states Universal Acceptance Corporation – CarHop’s affiliated financing company

Allegations – UDAAP and FCRA • Deceived consumers into believing they could build good credit • Provided inaccurate repossession information • Incorrectly reported previous customers as still owing money • Failed to have reasonable written policies and procedures to ensure the accuracy of consumers’ credit information

Consent Order - December 17, 2015 • Cease misrepresenting that they will report “good credit” • Correct credit reporting information • Provide credit reports to harmed consumers • Implement an audit program to ensure laws are followed • Pay a $6,465,000 civil penalty

#ACICFCA CFPB – AUTO LOANS – HERBIES AUTO SALES

Y King S Corp. d/b/a Herbies Auto Sales – An Ohio buy-here pay-here used car dealer

Allegations – UDAAP and TILA • Hid finance charges and advertised lower APR than consumers received • Used abusive practices Consent Order – January 21, 2016 • $700,000 in redress to harmed consumers • $100,000 civil money penalty • Stop deceiving consumers during financing process • Post actual car prices • Provide financing information in advance

#ACICFCA CFPB/DOJ – AUTO LOANS – FAIR LENDING

Toyota Motor Credit Corporation

Allegations – Policies that allowed dealers discretionary pricing resulted in African American and Asian and Pacific Islanders paying higher interest rates than white borrowers without regard to credit

Settlement/Consent Order – February 2, 2016 • Substantially reduce the amount by which loans can be marked up • Pay up to $21.9 million in remediation to affected consumers • Pay to hire a settlement administrator to distribute funds to affected consumers

Other Fair Lending Actions • Ally Financial - December 2013 - $80 million in restitution; $18 million in penalties • Honda – July 2015 - $24 million in restitution • Fifth Third – September 2015 - $18 million in restitution

#ACICFCA CFPB – AUTO TITLE LENDING - FIVE TITLE LENDERS

Auto Cash Leasing, LLC Interstate Lending, LLC Oasis Title Loans, LLC Phoenix Title Loans, LLC Presto Auto Loans, Inc.

Allegations - Violated TILA by advertising loan interest rates on their websites without advertising a corresponding APR

Notice of Charges – Filed September 21, 2016

#ACICFCA CFPB – AUTO TITLE LOANS - TMX Finance LLC TMX Finance LLC - One of the country’s largest auto title lenders, based in ; 1,300 locations in 18 states

Allegations: • Presented consumers with misleading information about loan terms • Exposed information about consumers’ debts to co-workers, neighbors, and family members

Consent Order – September 26, 2016 • Stop abusive loan-repayment policies • Stop intrusive visits to consumers’ homes or workplaces • Pay a $9 million penalty

#ACICFCA CFPB’s Rules - Payday Lending and Auto Loans

• Proposed Payday Loan and Auto Title Loan Regulations • Requires lenders to make sure consumers can repay the debt when due • Prevents repeated debit attempts that result in increased fees • Makes it more difficult for borrowers to re-borrow or refinance the same debt • Imposes reporting requirements on lenders

• Final Nonbank Auto Finance Company Regulations-Effective • Effective August 31, 2015 • CFPB extends its authority to the larger participants in the nonbank auto finance market • Applies to those companies who make, acquire, or refinance 10,000 or more loans or leases in a year • Goal is to ensure that these companies comply with federal law • Fairly marketing and disclosing auto financing • Providing accurate information to credit bureaus • Treating consumers fairly when collecting debts

#ACICFCA