WASHINGTON— In the CFPB’s lawsuit filed on Nov. 12, 2021, against FirstCash, Inc. and 19 of its subsidiaries for alleged violations of the Military Lending Act (MLA), the parties have reached a settlement and jointly submitted a stipulated final judgment and proposed order. If approved by the court, the agreement would resolve the case, the CFPB said.
The MLA puts in place protections for active duty servicemembers and certain dependents in connection with extensions of consumer credit. These protections include a maximum allowable annual percentage rate of 36%, a prohibition against required arbitration, and certain mandatory loan disclosures, the Bureau explained.
FirstCash, Inc. is a Delaware nonbank corporation, with its principal place of business in Fort Worth, Texas. FirstCash owns and operates over 1,000 retail pawnshops in the United States, offering pawn loans through its wholly owned corporate subsidiaries.
The CFPB alleges that since Oct. 3, 2016, the defendants violated the MLA by making pawn loans to borrowers covered under the MLA with rates that exceeded the MLA’s maximum allowable annual percentage rate of 36%. The CFPB also alleges that the loan agreements with covered borrowers violated the MLA by requiring arbitration in the case of a dispute and by failing to make all required loan disclosures. The alleged violations of the MLA also constitute violations of a 2013 Bureau order against a predecessor entity.
If entered by the court, the proposed order would require the defendants to:
- Set aside $5 million to ensure full redress to harmed servicemembers and their family members in connection with thousands of unlawful pawn loans
- Pay a $4 million fine to the CFPB’s victims relief fund
- Comply with the MLA and either offer an MLA-compliant loan product to servicemembers and their families or comply with a regulatory safe harbor meant to screen for MLA-protected borrowers
DCUC Responds
“Consumer protection is in our DNA, and DCUC has always been proud of that commitment,” said Jason Stverak, DCUC Chief Advocacy Officer. “We welcome this CFPB action – it’s exactly the kind of good-faith enforcement needed to make sure lenders play by the rules and protect our servicemembers and their families from predatory practices.”