The Consumer Financial Protection Bureau is suing James Carnes and Melissa Carnes, after the couple allegedly hid money through a series of fraudulent transfers to avoid paying more than $40 million in fines for illegal payday lending activities.
James Carnes was the CEO of Delaware-based short-term online lender Integrity Advance. In 2015, the agency sued Integrity Advance and James Carnes after the company allegedly deceived consumers about the cost of short-term loans and used remotely created checks to debit consumer bank accounts even after the consumers revoked authorization for automatic withdrawals.
In 2015, the CFPB ordered the company and Carnes to pay more than $38 million in restitution. Also, a $7.5 million civil penalty was levied against Integrity Advance while a $5 million fine was issued against Carnes. The company and its CEO appealed the decision to the 10th Circuit Court of Appeals, which affirmed the CFPB order last September. Carnes has allegedly not paid any of the fine.
According to the CFPB, James Carnes violated the Federal Debt Collection Procedures Act by transferring $12.3 million to his wife, via their revocable trusts, from 2013-15 to avoid having to pay restitution. “The defendants did not comply with the CFPB’s order, nor did they obtain a stay of that order, while that unsuccessful appeal was pending,” the regulatory agency stated.
In 2020, an administrative law judge recommended Integrity Advance pay $132.5 million in restitution to borrowers it was accused of duping. According to previous court documents, Integrity Advance was formed in 2007 and originated loans from 2008 to 2012. According to the CFPB, Carnes had already received more than $20 million from that sale by the end of 2015.