World Acceptance, a Greenville, S.C.-based finance company that provides subprime consumer loans, recently submitted documents to the Consumer Financial Protection Bureau as part of a federal investigation into its lending practices, CEO Sandy McLean said during an investor call this week.
The investigation concerns possible violations of consumer protection and truth-in-lending laws. The company also faces litigation from a former shareholder who has accused it of securities fraud for misleading investors. McLean did not address pending litigation during the call.
According to the company, the investigation was launched in March to "determine whether finance companies or other unnamed persons have been or are engaging in unlawful acts or practices in connection with the marketing, offering or extension of credit in violation of the Consumer Financial Protection Act, the Truth in Lending Act or any other Federal consumer financial law.
The CFPB's Civil Investigative Demand "contains broad requests for production of documents, answers to interrogatories and written reports related to loans made by the company and numerous other aspects of the companys business, according to World Acceptances Form 8-K filing with the U.S. Securities and Exchange Commission.
In a prepared statement regarding the investigation, the company said: "Ever since the creation of the CFPB, we have publicly and repeatedly discussed the expansive scope of its regulatory powers over consumer financial transactions and the possibility that [it] might exercise those powers in a way that directly or indirectly affects our company. So its not completely a surprise that the CFPB has decided to take a look at our operations. Weve attempted to cooperate fully [and] recently provided [the CFPB] with all the information we believe that they have asked for and thats where we stand. At this point we have not heard anything back to our submission of the information provided on the deadline that we were provided.
The Law Offices of Howard G. Smith previously announced it is conducting an investigation on behalf of World Acceptance shareholders, reviewing securities acquired between Feb. 8, 2013 and March 12, 2014, according to the law firms Web site. Representatives from the firm could not be immediately reached for comment for an update on the investigation.
The law firm stated it believes World Acceptance misled investors to believe that it was conducting a legitimate business when it instead was violating "most every predatory lending practice known to man, including making loans to people who were already in default of previous loans, charging usurious interest rates and physically showing up at borrowers homes and workplaces to intimidate them into paying."