Reduced CashCall fine would send the wrong message, CFPB says

A reduced fine against online lender CashCall for violating state interest rate caps would send the wrong message, according to a brief filed in a federal appeals court by the Consumer Financial Protection Bureau.

A reduced fine against online lender CashCall for violating state interest rate caps would send the wrong message, according to a brief filed in a federal appeals court by the Consumer Financial Protection Bureau.

The bureau argued to the U.S. Court of Appeals for the Ninth Circuit that a lower court had earlier improperly rejected its proposed $52 million civil penalty and a $236 million restitution order. The court had agreed with the CFPB in January in levelling a $10 million fine but denied the bureau’s bid to assess $287 million in restitution and penalties.

“That result undeniably leaves companies with little incentive to follow the law—a result that the Supreme Court and this Court have disapproved,” the bureau’s Oct. 19 brief said.

In September of 2016, CashCall, Inc., was found to have violated the law by offering high-interest payday loans online in 16 states where payday loans are barred. Though the loans were offered through firms based on the Cheyenne River Sioux Tribe reservation, the court sided with the CFPB in saying that CashCall was the “true lender” in the transactions.

The court enforced the fine for violating the Consumer Financial Protection Act by seeking to collect on loans that were void or partially nullified because they violated either state caps on interest rates or state licensing requirements for lenders. The lender on the reservation had claimed its tribal links exempted it from those laws.

In his January ruling, Judge John F. Walter of the U.S. District Court for the Central District of California found that the CFPB hadn’t shown that CashCall and its associates should pay restitution for the lending. He concluded in findings of fact and conclusions of law that the agency hadn’t put forth any evidence to show the lenders had decided to embark on an unlawful scheme to defraud borrowers. For one thing, the judge said, all the borrowers had gotten the loan proceeds, and therefore, the benefit of their bargain.

“Defendants plainly and clearly disclosed the material terms of the loans to consumers — including fees and interest rates — before the loan[s] were funded,” Walter wrote. “Accordingly, the court cannot conclude that defendants acted in bad faith, resorted to trickery or deception, or have been guilty of fraud in connection with the origination of the loans that are issue in this case.”