The Consumer Financial Protection Bureau sued high-cost installment lender Heights Finance Holding, formerly Southern Management, for alleged illegal loan-churning practices that harvested hundreds of millions in fees.
According to the CFPB, the Greenville, S.C.-based company, which includes trade names operating under the collective name of Southern Finance, identifies borrowers who are struggling to repay their existing loans, aggressively pushing them to refinance while incorrectly marketing the offering as the best chance for a fresh start.
Nearly 10 percent of Heights Finance borrowers refinance their loans with the company at least a dozen times, generating 40 percent of net revenue. The firm allegedly used incentive-compensation programs to reward employees who most successfully drove payment-stressed borrowers into refinancing while taking disciplinary action against the less successful.
“Southern’s business strategy centers on getting customers to refinance loans as early and as often as possible,” the CFPB stated. “The company uses an array of coercive practices to drive delinquent borrowers into fee-laden refinancing cycles. In addition to fees, these loans decrease the amount of money that borrowers can cash out and increase their total cost of borrowing with each successive refinance.”
A subsidiary of CURO Group Holdings, Heights Finance operates more than 250 storefronts in a half-dozen states, including Texas, Oklahoma, Alabama, Georgia, Tennessee and South Carolina. CURO Group Holdings, which operates in the United States and Canada, reported $209.2 million in revenue as of the end of the second quarter of 2023. The company acquired Heights Finance in 2021.
In a press release responding to the lawsuit, CURO Group Holdings denied the allegations and pledged to “vigorously defend its business practices.”