CFPB Drops Kansas Lawsuit Against Golden Valley, Other Payday Lenders, Raising Fears Agency Backs Up To Industry

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Mick Mulvaney, director of the Consumer Financial Protection Bureau in Washington.

PA

Without explanation, Consumer Financial Protection Bureau dropped Kansas lawsuit he had filed a year ago against four payday loan companies.

The move reinforced concerns from consumer advocates that the federal watchdog agency is moving away from scrutiny of the payday lending industry.

The CFPB, a federal agency formed in 2011 in the aftermath of the Great Recession, on Thursday filed a notice of voluntary termination in its case against Golden Valley Lending and three other payday loan companies: Silver Cloud Financial, Mountain Summit Financial and Majestic Lake Financial.

The agency had alleged in its lawsuit that the four companies charged interest rates of 440 to 950 percent, above what several states allow for consumer loans.

The case was filed in Kansas because the CFPB alleged that the companies were largely operating from a call center in Overland Park, despite being formally organized on a Native American reservation in California.

One of the companies, Silver Cloud Financial, also received funding from a Kansas company called RM Partners, according to the CFPB.

RM Partners was incorporated by Richard Moseley, Jr., according to Kansas Secretary of State records. Moseley’s father Richard Moseley, Sr., a Kansas City resident, was recently convicted of criminal charges relating to an illegal payday loan transaction.

The business model used by the four companies reflects what is known as the “rent-a-tribe” structure, where a payday lender nominally establishes their business on Native American reservations, where state regulations generally do not apply. .

Some payday lenders favor the model because they may charge higher interest rates than those allowed by the states.

“For the reasons described in our motion to dismiss, this case should never have been brought in the first place,” said Lori Alvino McGill, attorney representing Habematolel Pomo of Upper Lake, the tribe where the loan companies have. been established. “We are pleased that the Bureau has withdrawn the lawsuit which diverted the resources and attention of the tribe from economic activity that benefits its members and neighbors.”

The CFPB dismissed the case against the four companies without prejudice, which means the agency can resubmit the case in the future.

“The Bureau will continue to investigate the transactions involved,” the CFPB said in a statement. “Because this is an open application question, we cannot provide further comments.”

The CFPB did not respond directly to questions about the agency’s policy changes regarding payday lenders.

The news of the layoff comes on top of other recent measures taken by the CFPB that have raised concerns among consumer advocates that the agency created to protect consumers is now favoring industries it is supposed to control.

“It is deeply concerning that the Trump administration is working to completely gut the CFPB from within,” said Andy Morrison, campaign manager for New York-based advocacy group New Economy Project.

Late last year, President Trump appointed Mick Mulvaney, former senator from South Carolina and director of Trump’s Office of Management and Budget, as acting director of the CFPB.

Mulvaney received $ 31,700 in contributions from payday lenders during the 2015-2016 election cycle, according to a report released in December by USA Today, which has raised concerns that he is friendly with the payday lending industry in his watchdog role.

He also criticized a CFPB rule requiring payday lenders and other consumer lenders to consider whether borrowers can afford to repay their loans.

In the USA Today report. Mulvaney denied that these contributions influenced his positions about the agency or his decision-making as CFPB director.

In a letter to Federal Reserve Chairman Janet Yellen earlier this week, Mulvaney asked for no money to fund the agency in the second quarter of 2018, preferring to spend the agency’s reserve funding.

“It really looks like Mulvaney is doing what he can to make life easier for payday lenders, which is completely contrary to what almost everyone thinks it should happen,” said Diane Standaert, executive vice president. of the Center for Responsible Lending.

Kansas City has long been viewed as a notorious haven for payday lenders, especially those who handle illegal loan or debt collection transactions.

Scott Tucker, a 55-year-old Leawood resident who was a professional racing driver for some time, began his nearly 17-year sentence in a Brooklyn detention center on Jan.5. after being convicted of conducting an abusive payday loan transaction.

Tucker is the subject of an upcoming Netflix documentary series titled “Dirty Money” who is exploring his business and legal situation. Much of it was filmed before his conviction and includes in-depth interviews with Tucker and his lawyer, Tim Muir, who was also convicted last year and sentenced to seven years in prison.

Tucker’s businesses were also incorporated on Native American reservations in Oklahoma and Nebraska, but operated largely from Overland Park.

In the episode, Tucker said he could understand the federal government’s interest in him if he robbed banks, but didn’t understand why he had investigated the payday lending industry. The documentary is released publicly on January 26.

The CFPB and the Federal Trade Commission have taken on several other Kansas City area individuals with links to the payday lending industry.

Tucker’s brother, Joel Tucker, was ordered to pay $ 4 million following an FTC case against him alleging that he sold fake payday loan portfolios, which led consumers to receive phone calls from debt collectors demanding payment of outstanding debts .

The CFPB in 2015 continued Integrity Advance, which was headed by Mission Hills businessman Jim Carnes, for running a deceptive online loan business, which led to a judge’s recommendation that the company pay back $ 38.1 million in damages. Carnes appealed against this decision.

The FTC has also taken legal action against companies operated by Mission Hills resident Tim Coppinger for running a deceptive payday loan program, later resulting in a $ 54 million settlement.

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