CFPB What Have You Done for Me Lately? The Cash America Case, For One Thing

The CFPB just settled an enormous enforcement action against payday lender Cash America. Under the settlement, Cash America will pay $5 million in penalties and $14 million in refunds to overcharged customers. The CFPB found that Cash America or its affiliates robo-signed documents in debt collection lawsuits, made loans to military servicemen in violation of the federal Military Lending Act, and even destroyed documents during discovery. 

My student Andrew Anders is writing a paper about the other enforcement actions the CFPB has been bringing. As most of you know, the Dodd-Frank Act gives the CFPB various enforcement powers including the authority to engage in administrative enforcement actions (typically followed by a consent order) and to bring civil litigation proceedings. The CFPB is required to report all public enforcement actions to which it is a party, which is where Andy got his data, all from 2012.

During the time period of January 1, 2012 through December 31, 2012, the CFPB was involved in nine public enforcement actions. Of these actions, five were administrative actions and four were

litigation in Federal District court. Of the five administrative actions, three were against American Express and were consolidated into one consent order. This chart contains some of the details on these actions.

2012 CFPB Enforcement Comparison

Defendant	Industry	Type of action	Result	Remedies for consumers	Customers Benefiting	Penalty
Capital One Bank	Credit	Administrative	Consent Order	$140 Million	2 Million	$25 Million
American Express Centurion Bank	Credit	Administrative	Consent Order	$85 Million	250,000	$27.5 Million
Discover Bank	Credit	Administrative	Consent Order	$200 Million	3.5 Million	$14 Million
Gordon	Mortgage	Litigation	Summary Judgment for CFPB	$11.4 Million	Unknown	$1
Jalen	Mortgage	Litigation	Default Judgment	$2 Million	Unknown	$1 Million
3D Resorts-Bluegrass	Mortgage	Litigation	Pending Settlement	$550,000	Unknown	$1
Payday Loan Debt Solutions	Short Term Loans	Litigation	Settlement	$100,000	Unknown	$5000

The three largest enforcement actions taken by the CFPB in 2012 were against Capital One Bank, American Express Centurion Bank, and Discover Bank. In all three actions, the CFPB claimed that these companies were participating in misleading or deceptive practices. The damages paid to consumers in these three large actions ranged from $85 million to $200 million. The number of customers affected by each company ranged from 2 million to 250 thousand, creating an average per consumer distribution between $57 and $340.

The civil penalties ranged from $14 million to $27.5 million, which were placed in the Consumer Financial Civil Penalty Fund. This fund is used by the CFPB to provide compensation to consumers who were harmed but won’t be made whole through other sources. The CFPB can also use this money for consumer education and financial literacy programs. Andy’s chart below compares the remedies paid to the consumers and the civil money penalties that the companies paid.  

Consumer Remedies and Civil Penalties for 2012 CFPB Adjudication Actions

The ratios of the civil penalties to the consumer remedies for these three actions varied greatly. The penalty for Capital One Bank was only 15% of the total award. For American Express Centurion Bank the penalty was a much larger 24% of the total award, and Discover Bank’s penalty was a relatively small 6.5% of their total award.

 Now, looking at the litigation brought by the CFPB, three of the actions involved mortgage relief or set-up companies, and the fourth, a short-term lender. All of these actions involved misrepresentation of services and deceptive practices. The recoveries to were much lower in these cases than in the administrative enforcement actions. They ranged from $100,000 to $11.4 million.

Obviously, the CFPB has been plenty busy since 2012 as well, as evidenced by the Cash America case and others. But this is a summary of the action in 2012.