Federal Government Alleges Pawnbrokers ‘Cheated’ and ‘Swindled’ Military Families
The Consumer Financial Protection Bureau has filed a lawsuit against a nationwide chain of Texas-based pawn shops, alleging they tricked active-duty members and families into overcharging interest on pawn shops.
Pawn shops have charged military families interest rates on pawnshop loans that frequently exceeded 200% per year, in violation of the Military Loans Act, the lawsuit allegedly filed with a court on Friday. Federal Court of Fort Worth against the defendant companies FirstCash Inc. and Cash West America Inc.
The allegations concern more than 3,600 pawn shops made to more than 1,000 borrowers from military families at stores in Arizona, Nevada, Utah and Washington between June 2017 and May 2021.
Cash America West is a subsidiary of FirstCash and operates pawn shops in these four states. Overall, FirstCash and its subsidiaries operate more than 1,000 pawn shops in the United States, and the consumer office alleges that FirstCash, Cash America West and other subsidiaries made additional pawn shops in violation of the law on military loans in other states.
âFirstCash is a repeat offender and has cheated on military families over and over again,â CFPB director Rohit Chopra said in an announcement of the lawsuit. âFirstCash and Cash America West have scammed military families and denied them their right to go to court. “
The lawsuit involves allegations, and is not a conclusion or a final decision that the defendants violated the law.
FirstCash “will seek to engage with the CFPB and respond to allegations appropriately,” company officials said in a statement to the Military Times. âFirstCash deeply respects the members of our military and their families. We believe that the CFPB’s allegations are without merit.
The Military Loans Act, passed in 2006, protects active duty members and their families, including banning annual percentage rates above 36%. This rate, known as the military APR, includes certain fees, costs, and charges in the calculation. CFPB also alleges that FirstCash forced military borrowers to relinquish their ability to sue and failed to make all necessary loan disclosures, which is also a violation of military loans law.
CFPB lawsuit seeks injunction to stop alleged illegal conduct; indemnifying affected customers and correcting inaccurate information submitted to their credit reports; termination of consumer credit contracts; a civil financial penalty; and other actions.
The 3,600 loans are for a limited period for which the office has transaction data. The stores that made the loans account for only about 10% of FirstCash’s nationwide pawn shops, according to the lawsuit.
Thus, CFPB alleges that since October 3, 2016, FirstCash and its subsidiaries have granted additional loans which violate federal law. The Ministry of Defense regulations implementing the law were expanded in 2015 to include pawn transactions among those covered by the Military Loans Act. Pawn shops were required to bring their operations into compliance by October 3, 2016.
FirstCash announced in September 2016 its merger with Cash America International Inc.
In 2013, CFPB ordered Cash America International to end allegations of misconduct against military families and, under a consent order, the company agreed to reimburse up to $ 14 million to the military and to their families. Among other things, Cash America International has been accused of illegally overcharging service members and their families. At that time, CFPB described Cash America International as a payday lender.
Because FirstCash is a successor to Cash America International, the company is subject to the 2013 order, according to the lawsuit, which alleges that FirstCash violated that order.