CFPB finds 'cause' to supervise installment lender World Acceptance

Samuel Corum/Bloomberg

Installment lender World Acceptance Corp. is back in the crosshairs of the Consumer Financial Protection Bureau. 

On Friday the CFPB said that for the first time it was invoking a special authority that allows it to supervise nonbank financial firms that pose a risk to consumers. The CFPB determined that it has "reasonable cause" to supervise World Acceptance due to consumer complaints about the way the company markets, sells and bundles loans with insurance products. 

The order is not a finding that World Acceptance has engaged in wrongdoing, but rather is a determination that the company has met the legal requirements for supervision, the bureau said. The order mandating supervision was signed by CFPB Director Rohit Chopra in November but was released publicly because World Acceptance has contested the CFPB's findings. 

"The CFPB has determined that World Acceptance Corporation has met the legal requirements for supervision," the bureau said in a press release. "The CFPB is making this order public to provide transparency about how it assesses risks using consumer complaints and other factors."

World Acceptance, which is a public company, did not respond to repeated requests for comment.

In 2014, World Acceptance sparked controversy when former acting CFPB Director Mick Mulvaney dropped a probe into the Greenville, South Carolina, lender. At the time, consumer advocates alleged that Mulvaney had halted enforcement of the small-dollar lender after receiving several thousand dollars in donations from World Acceptance's political action committee when he was still a lawmaker. Mulvaney and the CFPB denied the allegations. Still, Mulvaney and his successor, former CFPB Director Kathy Kraninger, gutted tough requirements for payday lenders in a long-fought payday rule that remains in legal limbo pending the outcome of a Supreme Court case challenging the bureau's funding.

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In the current order, the CFPB based its findings on consumer complaints about World Acceptance, which offers personal loans ranging from $500 to $6,000 through 1,000 branches in 16 states. 

Consumers alleged that they were forced to buy insurance believing it was mandatory in order to get a loan, or they never knew they had purchased insurance at all. Consumers also complained that the loan terms did not include the cost of the insurance or that they did not understand the true cost of their loan. The CFPB cited the various complaints made to its database as grounds for establishing "reasonable cause" to begin supervising the company.

World Acceptance had $1.4 billion in outstanding balances on 600,000 loans as of March 31, 2023. The average balance on a loan was roughly $2,000 with an average annual interest rate of 46%. World Acceptance earns most of its revenue from interest and fees on installment loans, but the company also sells ancillary add-on products including insurance, roadside assistance memberships and tax preparation services, which are bundled into consumers' loan amounts, the bureau said.

Roughly 70% of the company's loans are refinancings of existing loans, the CFPB said in the order. The bureau has long been concerned with consumers getting trapped in a cycle of debt within the small-dollar lending industry, officials there have said over the years.