The Consumer Financial Protection Bureau has charged a Mississippi company with refusing to disclose check-cashing fees to consumers, deceptively pressuring borrowers into taking out multiple payday loans and keeping overpayments.
The CFPB's proposed order, filed Wednesday in U.S. District Court for the Southern District of Mississippi Northern Division, accuses All American Check Cashing, Mid-State Finance and owner Michael Gray of using deceptive tactics and statements to hide fees and pressure borrowers into loans. The company also used deception to stop consumers from backing out of transactions, the CFPB said.
The CFPB's lawsuit seeks to end the practices, obtain redress for consumers and impose penalties.
Dale Danks Jr., an attorney for Gray, declined to comment. All American Check Cashing, which operates 50 stores in Mississippi, Alabama and Louisiana, collects more than $1 million in fees annually, the CFPB said.
Separately, the Mississippi Department of Banking and Consumer Finance has sought to revoke the company's licenses and impose a $3 million penalty for violations involving refusing to give consumers refunds, according to published reports.
The 24-page lawsuit describes in detail how employees were instructed never to tell customers fees they were charged when cashing checks. All American charges a 3% fee for government-issued checks and a 5% fee for other checks. In Louisiana, the fee is 2% for government-issued checks and 5% for other checks
"Consumers deserve accurate and honest information from the financial institutions they depend on, but All American instead devised elaborate schemes to hide costs and take advantage of vulnerable borrowers," CFPB Director Richard Cordray said in a statement.
The CFPB's complaint alleges that All American failed to provide refunds to hundreds of consumers from 2011 to 2014.
Often a consumer would pay back a loan in a store even though the company had already requested an electronic fund transfer from the consumer's bank, resulting in the consumer paying back the loan twice. All American routinely deleted the credit balance on consumer accounts, and kept the overpayments without refunding consumers, the CFPB said.
The CFPB also alleged that All American created a payday loan program for consumers who receive benefits or a paycheck once a month, such as those receiving Supplemental Security Income and Social Security Disability Insurance.
The company deceptively promoted three or more two-week payday loans to borrowers rather than a 30-day loan because it provided extra fees, the CFPB said. The company's employees told consumers that the fees for 30-day loans offered by competitors were higher, when All American's loans were more expensive, the complaint alleged.
A consumer getting a 30-day payday loan for $400 would pay a maximum of $87.80 in fees; All American charged $120 in fees by giving a borrower several smaller loans.
The CFPB's lawsuit stated that Gray was "aware of the unlawful policies, procedures, and practices," and that he "promoted them, directed others to implement them, and personally created some of them." The complaint state that Gray received personal financial gain from the illegal practices.