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State awaits response from payday lending firm

Michael Gray, All American owner.

Michael Gray, All American owner.

The Mississippi Department of Banking and Consumer Finance is awaiting statewide payday lender All American Check Cashing’s response to findings the department made in its investigation of alleged illegal loan rollovers.

Stephen Schelver, attorney for the Banking Department, said subjects of department investigations typically reply within 30 to 60 days, though no hard deadline is in place. He said he could not say when examiners sent their findings to All American’s owner Michael Gray.

“The department has provided its observations and is currently awaiting further response from All American,” Schelver said. “The department must consider all available evidence and then come to its decision.”

All American’s attorney, Dale Danks Jr. of Jackson, did not return several calls for comment.

Any wrongdoing that is substantiated could lead the state to levy fines, order restitution to borrowers or even revoke the company’s state license to cash checks for a fee and make payday loans.

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The payday lender could also face penalties from the U.S. Consumer Financial Protection Bureau. The CFPB, created through the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, takes heightened interest in the collection practices of payday lenders, especially when the collections involve coercion to take out a new loan to pay off existing loans and fees.

Last July, the bureau hit Texas-based ACE Cash Express, the nation’s second largest payday lender, with $10 million in penalties, including $5 million in restitutions to borrowers.

Bureau Director Richard Cordray charged that ACE Cash “relentlessly and overzealously” pursued overdue borrowers, unlawfully calling employers of tardy borrowers and threatening borrowers with lawsuits. After applying sustained pressure, ACE Cash would offer to relieve the pressure by letting the delinquent borrower  pay off existing loans by taking out yet another payday loan, Cordray said.

“Intimidation used by ACE Cash Express was part of a culture of coercion aimed at pressuring payday borrowers into debt traps.”

Payday lenders make short-term low-dollar loans to borrowers who have a job or a source of regular income. The borrower leaves the lender a post-dated check for which the lender can seek payment if the loan is not repaid within a specified time.

Mississippi law allows 30-day repayments on loans of $250 to $500. Loans below $250 must be repaid with 14 days. State law prohibits rollovers by which the borrower takes out a new loan to pay off the old loan as well as fees that run about $23 for each $100 loaned. The new fees cause the loan principal to grow with each new issuance.

Rollovers – specifically claims that All American Check Cashing mandated store employees and managers to encourage rollovers – are at the heart of the state’s investigation.

A year ago, banking examiners showed up unannounced at 15 of Madison-based All American’s 41 Mississippi stores. Store managers and company executives refused access to the transaction records for four days in mid-June. All American came under a cease and desist order on June 16 to stop all rollovers.

Examiners turned up a key document on the company intranet outlining the “Monthly Lending Program,” a policy the department suspects All American devised for customers who receive a monthly income.

Investigators say the program directed employees to accept only the fee on a delayed deposit check.

The so-called Monthly Lending Program also outlined how to illegally roll over a check during the middle of each month, the cease and desist order states.

The order notes All American designed the program especially for borrowers who get monthly paychecks or government benefit checks.
Gray, who founded All American as a payday advance lender and car title loan lender in 1999, claimed in an interview with the Mississippi Business Journal last year that a fired chief administrative officer and compliance chief put the “Monthly Lending Program” document on the company intranet without his knowledge.

The former All American executive, Alan Crancer, counters that Gray distributed the document to store managers and others during a weekend training program at a Vicksburg casino. Crancer said Gray fired him for refusing to overlook the rollover practices as part of his chief compliance officer duties.

The cease and desist order noted that in addition to All American’s intranet, examiners found the Monthly Lending Program document and participation in its use at “multiple examined locations.”

Just how much of the state Banking Department’s investigation will ever be made public is unclear.  The department must give its examination of All American the same confidentiality it gives state chartered banks it oversees, department officials say.

However, any civil penalty – financial or otherwise – “will be put out there for public consumption,” said Schelver, the department’s lawyer.

The penalty would be posted on the department’s Website, along with any order “resolving the complaint,” he said.

Like the Consumer Financial Protection Bureau, the banking department can order restitution to borrowers victimized by illegal loan rollovers, according to Schelver.

All American would have the option of going to court to challenge any penalties assessed, Schelver said, but noted he is unsure whether the challenge would go to the Circuit Court or the Court of Appeals. The appeal court would be the first stop should All American claim the Banking Department acted arbitrarily and capriciously, he added.


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